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  • Publication
    The Distortionary Effects of Government Procurement: Evidance From Medicaid Prescription Drug Purchasing
    (2006-02-01) Duggan, Mark; Morton, Fiona M Scott
    In 2003 the federal-state Medicaid program provided prescription drug coverage to more than 50 million people. To determine the price that it will pay for each drug, Medicaid uses the average private sector price. When Medicaid is a large part of the demand for a drug, this creates an incentive for its maker to increase prices for other health care consumers. Using drug utilization and expenditure data for the top 200 drugs in 1997 and in 2002, we investigate the relationship between the Medicaid market share (MMS) and the average price of a prescription. Our estimates imply that a 10-percentage-point increase in the MMS is associated with a 7 to 10 percent increase in the average price of a prescription. In addition, the Medicaid rules increase a firm's incentive to introduce new versions of a drug in order to raise price. We find empirical evidence that firms producing newer drugs with larger sales to Medicaid are more likely to introduce new versions. Taken together, our findings suggest that government procurement rules can alter equilibrium price and product proliferation in the private sector.
  • Publication
    Teaching Hospital Five-Year Mortality Trends in the Wake of Duty Hour Reforms
    (2013-08-01) Volpp, Kevin. G; Small, Dylan. S; Romano, Patrick S; Itani, Kamal MF; Rosen, Amy K; Even-Shoshan, Orit; Wang, Yanli; Bellini, Lisa; Halenar, Michael J; Zhu, Jingsan; Silber, Jeffrey H
    Background The Accreditation Council for Graduate Medical Education (ACGME) implemented duty hour regulations for residents in 2003 and again in 2011. While previous studies showed no systematic impacts in the first 2 years post-reform, the impact on mortality in subsequent years has not been examined. OBJECTIVE To determine whether duty hour regulations were associated with changes in mortality among Medicare patients in hospitals of different teaching intensity after the first 2 years post-reform. DESIGN Observational study using interrupted time series analysis with data from July 1, 2000 to June 30, 2008. Logistic regression was used to examine the change in mortality for patients in more versus less teaching-intensive hospitals before (2000–2003) and after (2003–2008) duty hour reform, adjusting for patient comorbidities, time trends, and hospital site. PATIENTS Medicare patients (n  = 13,678,956) admitted to short-term acute care non-federal hospitals with principal diagnoses of acute myocardial infarction (AMI), gastrointestinal bleeding, or congestive heart failure (CHF); or a diagnosis-related group (DRG) classification of general, orthopedic, or vascular surgery. MAIN MEASURE All-location mortality within 30 days of hospital admission. KEY RESULTS In medical and surgical patients, there were no consistent changes in the odds of mortality at more vs. less teaching intensive hospitals in post-reform years 1–3. However, there were significant relative improvements in mortality for medical patients in the fourth and fifth years post-reform: Post4 (OR 0.88, 95 % CI [0.93–0.94]); Post5 (OR 0.87, [0.82–0.92]) and for surgical patients in the fifth year post-reform: Post5 (OR 0.91, [0.85–0.96]). CONCLUSIONS Duty hour reform was associated with no significant change in mortality in the early years after implementation, and with a trend toward improved mortality among medical patients in the fourth and fifth years. It is unclear whether improvements in outcomes long after implementation can be attributed to the reform, but concerns about worsening outcomes seem unfounded.
  • Publication
    The Impact of Health Information Technology on Hospital Productivity
    (2013-01-01) Lee, Jinhyung; McCullough, Jeffrey S; Town, Robert J
    Health information technology (IT) has been championed as a tool that can transform health care delivery. We estimate the parameters of a value-added hospital production function correcting for endogenous input choices to assess the private returns hospitals earn from health IT. Despite high marginal products, the total benefits from expanded IT adoption are modest. Over the span of our data, health IT inputs increased by more than 210% and contributed about 6% to the increase in value-added. Not-for-profits invested more heavily and differently in IT. Finally, we find no compelling evidence of labor complementarities or network externalities from competitors’ IT investment.
  • Publication
    Information and Quality When Motivation Is Intrinsic: Evidence From Surgeon Report Cards
    (2013-12-01) Kolstad, Jonathan T
    If profit maximization is the objective of a firm, new information about quality should affect firm behavior only through its effects on market demand. I consider an alternate model in which suppliers are motivated by a desire to perform well in addition to profit. The introduction of quality "report cards" for cardiac surgery in Pennsylvania provides an empirical setting to isolate the relative role of extrinsic and intrinsic incentives in determining surgeon response. Information on performance that was new to surgeons and unrelated to patient demand led to an intrinsic response four times larger than surgeon response to profit incentives.
  • Publication
    Input Constraints and the Efficiency of Entry: Lessons From Cardiac Surgery
    (2010-02-01) Cutler, David M; Huckman, Robert S; Kolstad, Jonathan T
    Prior studies suggest that with elastically supplied inputs free entry may lead to an inefficiently high number of firms in equilibrium. Under input scarcity, however, the welfare loss from free entry is reduced. Further, free entry may increase use of high-quality inputs, as oligopolistic firms underuse these inputs when entry is constrained. We assess these predictions by examining how the 1996 repeal of certificate-of-need (CON ) legislation in Pennsylvania affected the market for cardiac surgery in the state. We show that entry led to a redistribution of surgeries to higher quality surgeons, and that this entry was approximately welfare neutral.
  • Publication
    Price Discrimination and Bargaining: Empirical Evidence From Medical Devices
    (2013-02-01) Matthew, Grennan.
    Many important issues in business-to-business markets involve price discrimination and negotiated prices, situations where theoretical predictions are ambiguous. This paper uses new panel data on buyer-supplier transfers and a structural model to empirically analyze bargaining and price discrimination in a medical device market. While many phenomena that restrict different prices to different buyers are suggested as ways to decrease hospital costs (e.g., mergers, group purchasing organizations, and transparency), I find that: (i) more uniform pricing works against hospitals by softening competition; and (ii) results depend ultimately on a previously unexplored bargaining effect.
  • Publication
    The Effect of Shift Structure on Performance
    (2012-04-01) Brachet, Tanguy; David, Guy; Drechsler, Andrea Michelle
    The effect of shift structure on worker performance and productivity is of increasing interest to firms and regulatory bodies. Using approximately 743,000 emergency medical incidents attended by 2,381 paramedics in Mississippi, we evaluate the extent that paramedics' performance toward the end of shifts is impacted by shift length. We find evidence that performance deteriorates toward the end of long shifts, and argue that fatigue is the mediating factor. Our calculations imply that such deterioration may result in a 0.76 percent increase in 30-day mortality. These findings have implications for workforce organization, calling attention to regulation designed to limit extended work hours.
  • Publication
  • Publication
    Estimating the Impact of Medical Innovation: A Case Study of HIV Antiretroviral Treatments
    (2008-01-01) Duggan, Mark; Evans, William N
    As health care consumes a growing share of GDP, the demand for better evidence regarding the effects of health care treatments and how these vary across individuals is increasing. Estimating this with observational data is difficult given the endogeneity of treatment decisions. But because the random assignment clinical trials (RACTs) used in the FDA approval process only estimate average health effects and do not consider spending, there is no good alternative. In this study we use administrative data from California’s Medicaid program to estimate the impact of HIV antiretroviral treatments (ARVs). We use data on health care utilization to proxy for health status and exploit the rapid takeup of ARVs following their FDA approval. Our estimate of a 68 percent average mortality rate reduction is in line with the results from RACTs. We also find that the ARVs lowered short-term health care spending by reducing expenditures on other categories of medical care. Combining these two effects we estimate the cost per life year saved at $19,000. Our results suggest an alternative method for estimating the real-world effects of new treatments that is especially well-suited to those treatments that diffuse rapidly following their approval.
  • Publication
    The Economics, Opportunities, and Challenges of Health Insurance Exchanges
    (2010-12-01) Duggan, Mark; Kocher, Robert