Working Paper: NBER ID: w24497
Authors: Adam Sacarny
Abstract: Performance-raising practices tend to diffuse slowly in the health care sector. To understand how incentives drive adoption, I study a practice that generates revenue for hospitals: submitting detailed documentation about patients. After a 2008 reform, hospitals could raise their Medicare revenue over 2% by always specifying a patient’s type of heart failure. Hospitals only captured around half of this revenue, indicating that large frictions impeded takeup. Exploiting the fact that many doctors practice at multiple hospitals, I find that four-fifths of the dispersion in adoption reflects differences in the ability of hospitals to extract documentation from physicians. Hospital adoption is robustly correlated with generating survival for heart attack patients and using inexpensive survival-raising standards of care. Hospital-physician integration and electronic medical records also influence adoption. These findings highlight the potential for institution-level frictions, including agency conflicts, to explain variations in health care performance across providers.
Keywords: Healthcare; Adoption; Revenue Generation; Financial Incentives; Agency Conflicts
JEL Codes: D22; I1; L2; O31; O33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| 2008 Medicare reform (I18) | adoption of detailed heart failure coding practices (I18) |
| hospital characteristics (I23) | adoption of detailed heart failure coding practices (I18) |
| hospital performance (I11) | adoption of detailed heart failure coding practices (I18) |
| hospital adoption rates (J13) | clinical outcomes (survival rates for heart attack patients) (I11) |
| hospital-physician integration (I11) | adoption of detailed heart failure coding practices (I18) |
| use of electronic medical records (EMRs) (I13) | adoption of detailed heart failure coding practices (I18) |