Collard-Wexler, AllanHeebsh, Benjamin2020-06-092021-05-272020https://hdl.handle.net/10161/20965<p>The way in which health care providers make treatment decisions and the incentives which drive these choices are the subject of much policy and research discussion. Financial incentives have been used to steer provider treatments to more cost-effective options, such as in Medicare's recent Accountable Care Organization model, while acquisition of providers by a firm can provide incentives for providers to treat patients differently than prior to acquisition. In this dissertation, I use a variety of administrative data sources to study the effects of these financial incentives on both physicians and dialysis clinics.</p><p>In Chapter 1, I study the effects of integration between referring physicians and specialists in cardiology. To address concerns of endogeneity of integration, I exploit a change in Medicare payment rates which increased the financial benefit to vertically integrating for cardiologists. Instrumental variables estimates show that cardiologists who work in the same practice as cardiac surgeons are 7.7% more likely to refer patients for surgery rather than more conservative options. Patients diagnosed by integrated cardiologists in turn have worse mortality and readmission outcomes, with 18.7% higher mortality risk and 13.4% higher risk of readmission for AMI within 180 days. This is in spite of the fact that patients diagnosed by integrated cardiologists have 7.8% higher medical spending in the 180 days following diagnosis. I provide evidence that these effects are not driven by inherent risks of invasive surgery or selection on patient observables, but worse outcomes for patients receiving the most conservative treatment option.</p><p>In Chapters 2 and 3, which are joint with Paul Eliason, Ryan McDevitt, and James Roberts, we use a rich panel of Medicare claims data for nearly one million dialysis patients to advance the literature on the effects of mergers and acquisitions by studying the precise ways in which providers change their behavior following an acquisition and the effects of bundled payment reforms. We base our empirical analysis on more than 1,200 acquisitions of independent dialysis facilities by large chains over a twelve-year period and find that chains transfer several prominent strategies to the facilities they acquire. Most notably, acquired facilities converge to the behavior of their new parent companies by increasing patients' doses of highly reimbursed drugs, replacing high-skill nurses with less-skilled technicians, and waitlisting fewer patients for kidney transplants. We then show that patients fare worse as a result of these changes: outcomes such as hospitalizations and mortality deteriorate, with our long panel allowing us to identify these effects from within-facility or within-patient variation around the acquisitions. Because overall Medicare spending increases at acquired facilities, mostly as a result of higher drug reimbursements, this decline in quality corresponds to a decline in value for payers. We conclude the paper by considering the channels through which acquisitions produce such large changes in provider behavior and outcomes, finding that increased market power cannot explain the decline in quality. Rather, the adoption of the acquiring firm's strategies and practices drives our main results, with greater economies of scale for drug purchasing responsible for more than half of the change in profits following an acquisition. </p><p>Chapter 3 studies the effect of a bundled payment reform in 2011 for dialysis providers. Using an instrumental variables strategy, exploiting a biological interaction between a patient's elevation of residence and their health outcomes, we show that bundled payment reform yielded better hospitalization outcomes for patients, but worse transfusion outcomes. This is consistent with the decreased use of drugs to prevent blood transfusions observed after the reform. In addition, we find significant patient and firm heterogeneity in responses.</p>EconomicsHealth careIndustrial organizationDissertation