Unhealthy Management
Control Without Ownership: Governance of Nonprofit Hospitals
Katharina Lewellen, Gordon Phillips & Giorgo Sertsios
NBER Working Paper, August 2025
Abstract:
We provide a comprehensive analysis of the governance structures of nonprofit hospitals and hospital systems. We study both the internal governance mechanisms (boards of directors, incentive contracts) and external mechanisms (market for corporate control, government oversight), with particular focus on the latter. Nonprofit boards are unusually large, include employee directors, exhibit less industry expertise among outside directors, and face weak external oversight. CEO pay and turnover are largely unresponsive to non-financial metrics such as quality or charity provision. The disciplinary role of the market for corporate control is also weaker in the nonprofit sector: nonprofits with poor financial performance are half as likely to be acquired or closed as for-profits, and weak performance on non-financial metrics has no effect on acquisitions or closures. Using time-series and cross-sectional variation in state oversight of nonprofits, we find that oversight strength explains a substantial portion of the gap in takeover rates between for-profits and nonprofits. We conclude that nonprofit governance structures lack the attributes traditionally associated with “good governance.”
Lots of Pain for Little Gain: Three Decades of Medicaid Estate Recovery
Amanda Spishak-Thomas, Emma Sandoe & Heather Howard
Journal of Health Politics, Policy and Law, forthcoming
Abstract:
Since Congress enacted Medicaid estate recovery into law in 1993, there have been few changes to the policy and little research to investigate its effectiveness. Under Medicaid estate recovery -- a response to the rising and uncertain costs associated with long-term custodial care among a rapidly aging American population -- states have the right to track former Medicaid beneficiaries’ assets and seek recovery from their estate after their death. While it makes an insignificant dent in state budgets, Medicaid estate recovery nonetheless can have a lasting impact on the lives of families subject to its repayment requirements. For low-income families where homeownership is their primary source of wealth, policies aimed at homeowners may exacerbate longstanding disparities in wealth and disproportionately burden Black and Hispanic families. Recently, some states have initiated policy changes to address problems with Medicaid estate recovery and similar legislation also has been introduced in Congress. Such reforms, if more widely adopted, may improve the financial circumstances of surviving family members of deceased Medicaid beneficiaries.
Creative Financing and Public Moral Hazard: Evidence from Medicaid and the Nursing Home Industry
Martin Hackmann, Juan Rojas & Nicolas Ziebarth
NBER Working Paper, August 2025
Abstract:
This paper studies the misallocation of Medicaid funds, its consequences for reimbursement rates, the quantity, and the quality of care provided. Combining two decades of administrative, audit, and survey data on U.S. nursing homes, we show that states employ creative financing schemes to divert federal matching funds from their intended purposes. Our theoretical and empirical analysis demonstrates that, to increase federal matching funds, such schemes distort the quality-quantity tradeoff. In Indiana, exploiting plausibly exogenous variation in the rollout of a creative financing scheme, we find a disproportionate expansion of Medicaid-funded care for dementia patients in the lowest-quality nursing facilities.
Unveiling Medicaid fraud and abuse: The influence of price transparency and state political context
Ahreum Han, Christian Janousek & Shihyun Noh
Health Economics, Policy and Law, forthcoming
Abstract:
Despite the tremendous waste due to Medicaid fraud and abuse, not much scholarly attention has been paid to state variation in the investigations. This study explores the factors influencing variations in Medicaid fraud and abuse investigations across U.S. states, with a focus on the role of All-Payer Claims Databases (APCDs) and state political context. To test the impacts of price transparency and political factors, we built a dataset spanning eight years (2014 to 2021) and covering 49 states, excluding North Dakota. We then conducted a fixed-effects panel data analysis based on the results of a Hausman test. The impact of APCDs is statistically significant, suggesting its association with more fraud and abuse detection. A Democratic governor tends to be associated with fewer Medicaid fraud investigations. The findings of this research demonstrate that the operation of APCDs can influence the number of Medicaid fraud investigations conducted by Medicaid Fraud Control Units (MFCUs). Moreover, political discretion plays a role in the number of state investigations into Medicaid fraud and abuse.
Nursing home payroll subsidies and the trade-off between staffing and access to care for Medicaid enrollees
Thomas Hegland
Journal of Health Economics, September 2025
Abstract:
Payroll subsidies are a promising tool for increasing nursing home staffing levels. However, promoting increased staffing may come at the expense of access to care for Medicaid enrollees if it enables nursing homes to attract more lucrative, non-Medicaid residents. In this study, I examine a set of payroll subsidies offered by state Medicaid programs between 1998 and 2010, using nursing home-level variation in subsidy generosity to identify subsidy effects. I find that each additional (2010) dollar of subsidies offered per resident-day increased staffing by just over 10 min per resident-day, but decreased the Medicaid share of new nursing home admissions by about 1.8 percentage points. These figures translate into overall average treatment effects equivalent to an increase in staffing by approximately 7.4% of pre-subsidy average staffing, and a decrease in the Medicaid-share of admissions by 11.5% relative to the pre-subsidy baseline. The subsidies also increased nursing home resident turnover and decreased the average care needs of newly admitted residents. Overall, these results highlight that while nursing home payroll subsidies are effective tools for encouraging increased staffing levels, the subsidies also can lead to changes in nursing home admissions and the characteristics of admitted residents.
Public Procurement vs. Regulated Competition in Selection Markets
José Ignacio Cuesta & Pietro Tebaldi
NBER Working Paper, August 2025
Abstract:
A common approach to markets with adverse selection is to regulate competition to minimize inefficiencies, while preserving consumer choice among firms. We study the role of procurement auctions -- leading to sole provision by the winning firm -- as an alternative market design. Relative to regulated competition, auctions affect product variety, quality, markups, and remove cream-skimming incentives. We develop a framework to study this comparison and apply it to individual health insurance in the US. We find that procurement auctions would increase consumer welfare in most markets, mainly by limiting inefficiencies from adverse selection and market power, and by increasing quality.
Insurer Size and Negotiated Hospital Prices: Insights From the Affordable Care Act in Arkansas
Jee-Hun Choi
Health Economics, forthcoming
Abstract:
This paper examines the role of insurer size in price negotiations between commercial health insurers and hospitals in the United States. The empirical analysis focuses on a dominant insurer in the Arkansas individual health insurance market that experienced a size increase due to a policy change. Under the Affordable Care Act (ACA), Arkansas expanded its Medicaid program, but unlike other expansion states, it used individual plans -- a private insurance option generally not designed for Medicaid -- to provide coverage to newly insured beneficiaries. This unique policy nearly doubled the insurer's individual plan enrollment after the ACA was implemented. Admission-level regression analysis reveals that the insurer's hospital inpatient prices for individual plans decreased by 16.7% following the expansion. Consistent with the predictions from bargaining models, the findings suggest that the insurer's increased bargaining leverage due to its larger size is the primary mechanism behind the price reduction.
How does Medicaid managed care affect provider behavior? New evidence from spillovers on private health care
Ajin Lee
Journal of Public Economics, August 2025
Abstract:
Medicaid is increasingly provided by private managed care plans. I examine the direct effect of Medicaid privatization on health care utilization of Medicaid beneficiaries as well as the indirect effect on non-Medicaid privately insured individuals. Exploiting the staggered rollout of the Medicaid managed care (MMC) mandate across counties in New York, I find evidence of quality improvements under MMC, such as increased routine office visits and child immunizations. MMC also expanded Medicaid beneficiaries’ access to physicians by increasing the number of providers treating Medicaid patients. I find that routine office visits similarly increased for non-Medicaid privately insured individuals, and the same-signed spillover effect is larger in low-income areas. My findings suggest that physicians may have updated their overall practice styles when the mandate affected a large share of their patients.
Regulating malpractice risk and medical decision-making: Evidence from births
Alice Chen, Michael Richards & Rachel Shriver
Journal of Policy Analysis and Management, forthcoming
Abstract:
The literature remains mixed on the extent to which medical malpractice reforms affect physician overuse of procedures (i.e., “defensive medicine”). We bring new evidence to this discourse by examining a recent reform in North Carolina that introduced caps on noneconomic damages. We focus on a setting where malpractice risk is high and service intensity is strongly subject to physicians’ discretion: obstetrics care. Comparing discharge data from North Carolina to Florida, we show that caps on noneconomic damages causally reduce the likelihood of a cesarean delivery by, on average, 5%, with the effect size nearing 7% five years post-policy implementation. Physicians also substitute away from other intensive procedures such as vacuum and forceps deliveries but maintain control over the timing of births by increasing medical inductions. Our findings suggest that the reduction in cesarean deliveries due to North Carolina's damage caps can reduce annual spending by approximately $4.6 million.