Working Paper: NBER ID: w19200
Authors: Amitabh Chandra; Amy Finkelstein; Adam Sacarny; Chad Syverson
Abstract: 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.
Keywords: healthcare; productivity; allocation; market share
JEL Codes: D22; D24; I11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| hospital productivity (D24) | market share (L17) |
| hospital productivity (D24) | patient numbers (I11) |
| hospital productivity (D24) | growth in market share (F62) |