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Publication The Impact of the Medicare Rural Hospital Flexibility Program on Patient Choice(2011-05-01) Gowrisankaran, Gautam; Lucarelli, Claudio; Schmidt-Dengler, Philipp; Town, Robert JThis paper seeks to understand the impact of the Medicare Rural Hospital Flexibility (Flex) Program on rural resident hospital choice. The program created a new class of hospital, the Critical Access Hospital (CAH), which receives more generous reimbursement in return for limiting its beds and services. The program's goal is to maintain access to hospital care. Estimates from a patient choice model show that patient utility from visiting a hospital was negatively affected by conversion. While the lower bed capacity appears to play a minor role, the reduction in services results in a 28 percent drop in admission rates.Publication The Rise in the Disability Rolls and the Decline in Unemployment(2003-02-01) Duggan, Mark; Autor, David HBetween 1984 and 2001, the share of nonelderly adults receiving Social Security Disability Insurance income (DI) rose by 60 percent to 5.3 million beneficiaries. Rapid program growth despite improving aggregate health appears to be explained by reduced screening stringency, declining demand for less skilled workers, and an unforeseen increase in the earnings replacement rate. We estimate that the sum of these forces doubled the labor force exit propensity of displaced high school dropouts after 1984, lowering measured U. S. unemployment by one-half a percentage point. Steady state calculations augur a further 40 percent increase in the rate of DI receipt.Publication Health Employment, Medical Spending, and Long-Term Health Reform(2012-03-01) Pauly, Mark V; Saxena, AnandThis article explores the relationships between the growth in the medical workforce in an aging society and employment in other sectors of the economy, based on data from the USA since 1985. Employment in medical services grew, but did not displace employment in other sectors uniformly. Instead, regression analysis shows that medical workforce growth produced contemporaneous reductions in relative employment in the manufacturing, construction, and information sectors, while being associated with growth in other services and public administration. Import penetration and productivity growth mattered, but much of the displacement remains even after controlling for these factors.Publication The Distortionary Effects of Government Procurement: Evidance From Medicaid Prescription Drug Purchasing(2006-02-01) Duggan, Mark; Morton, Fiona M ScottIn 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 Market Definition in Crude Oil: Estimating the Effects of the BP/ARCO Merger(2007-01-01) Hayes, John; Shapiro, Carl; Town, Robert JPublication Differential Pricing for Pharmaceuticals: Reconciling Access, R&D and Patents(2003-09-01) Danzon, Patricia. M; Toese, AdrianThis paper reviews the economic case for patents and the potential for differential pricing to increase affordability of on-patent drugs in developing countries while preserving incentives for innovation. Differential pricing, based on Ramsey pricing principles, is the second best efficient way of paying for the global joint costs of pharmaceutical R&D. Assuming demand elasticities are related to income, it would also be consistent with standard norms of equity. To achieve appropriate and sustainable price differences will require either that higher-income countries forego trying to “import” low drug prices from low-income countries, through parallel trade and external referencing, or that such practices become less feasible. The most promising approach that would prevent both parallel trade and external referencing is for payers/purchasers on behalf of developing countries to negotiate contracts with companies that include confidential rebates. With confidential rebates, final transactions prices to purchasers can differ across markets while manufacturers sell to distributors at uniform prices, thus eliminating opportunities for parallel trade and external referencing. The option of compulsory licensing of patented products to generic manufacturers may be important if they truly have lower production costs or originators charge prices above marginal cost, despite market separation. However, given the risks inherent in compulsory licensing, it seems best to first try the approach of strengthening market separation, to enable originator firms to maintain differential pricing. With assured market separation, originators may offer prices comparable to the prices that a local generic firm would charge, which eliminates the need for compulsory licensing. Differential pricing could go a long way to improve LDC access to drugs that have a high income market. However, other subsidy mechanisms will be needed to promote R&D for drugs that have no high income market.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 HBackground 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 Vaccine Supply: Effects of Regulation and Competition(2011-01-01) Danzon, Patricia. M; Pereira, Nuno SIn US vaccine markets, competing producers with high fixed, sunk costs face relatively concentrated demand. The resulting price and quality competition leads to the exit of all but one or very few producers per vaccine. Our empirical analysis of exits from US vaccine markets supports the hypothesis that high fixed costs and both price and quality competition contribute to vaccine exits. We find no evidence that government purchasing has significant effects, possibly because government purchase tends to increase volume but lower price, with offsetting effects. Evidence from the flu vaccine market confirms that government purchasing is not a necessary condition for exits and the existence of few suppliers per vaccine in the US.Publication The Convergence Between For-Profit and Nonprofit Hospitals in the United States(2009-11-01) David, GuyThis paper proposes a novel model of the hospital industry in the United States in which firms in effect choose their ownership type and the regulatory and tax regimes under which they must function. Accordingly, I develop a model in which firms have identical objectives but differ in their ability to benefit from a given ownership form. Changes in the economic environment alter firms’ incentives to maintain a given ownership type. This in turn induces firms to modify their capacity and encourages some firms to switch ownership type. One implication of this model is that changes in the economic environment that have occurred since 1960 imply that the optimal size of those firms which choose to be for profit should more closely approximate the optimal size of firms which choose to be nonprofit. Hospital level data indicate that this size convergence has indeed occurred. In 1960, U.S. nonprofit hospitals maintained on average more than three times as many beds per hospital as their for-profit counterparts; following a monotonic decline in relative size, by 2000, the average nonprofit hospital was only 32% larger than the typical for-profit hospital. Declining roles of government hospitals, population growth, suburbanization, and increasing government intervention in the healthcare market help explain the convergence in size. Analysis of data at the state and Metropolitan Statistical Area (MSA) levels is consistent with the principal theoretical predictions.Publication Hospital Market Structure and the Behavior of Not-For-Profit Hospitals: Evidence From Responses to California's Disproportionate Share Program(2002-01-01) Duggan, MarkI exploit a change in hospital financial incentives to examine whether the behavior of private not-for-profit hospitals is systematically related to the share of nearby hospitals organized as for-profit firms. My findings demonstrate that not-for-profit hospitals in for-profit intensive areas are significantly more responsive to the change than their counterparts in areas served by few for-profit providers. Differences in financial constraints and other observable factors correlated with for-profit hospital penetration do not explain the heterogeneous response. The findings suggest that not-for-profit hospitals mimic the behavior of private for-profit providers when they actively compete with them.