Monitoring for Waste: Evidence from Medicare Audits
Quarterly Journal of Economics, 2024, 139(2): 993-1049
[Ungated] [Online Appendix] [MVPF Appendix] [NBER WP] [Replication code] | [Summary]
Research Question: How effective is monitoring for wasteful healthcare spending?
Abstract: This paper examines the tradeoffs of monitoring for wasteful public spending. By penalizing unnecessary spending, monitoring improves the quality of public expenditure and incentivizes firms to invest in compliance technology. I study a large Medicare program that monitored for unnecessary healthcare spending and consider its effect on government savings, provider behavior, and patient health. Every dollar Medicare spent on monitoring generated $24-29 in government savings. The majority of savings stem from the deterrence of future care, rather than reclaimed payments from prior care. I do not find evidence that the health of the marginal patient is harmed, indicating that monitoring primarily deters low-value care. Monitoring does increase provider administrative costs, but these costs are mostly incurred upfront and include investments in technology to assess the medical necessity of care.
Regulated Revenues and Hospital Behavior: Evidence from a Medicare Overhaul
with Tal Gross, Adam Sacarny, and David Silver.
Review of Economics and Statistics, 2024, 106(6): 1709-1718
[Ungated] [NBER WP] [Replication code]
Research Question: How do hospitals respond to changes in the price of an inpatient admission?
Abstract: We study a 2008 policy reform in which Medicare revised its hospital payment system to better reflect patients’ severity of illness. We construct a simulated instrument that predicts a hospital’s policy-induced change in reimbursement using pre-reform patients and post-reform rules. The reform led to large persistent changes in Medicare payment rates across hospitals. Hospitals that faced larger gains in Medicare reimbursement increased the volume of Medicare patients they treated. The estimates imply a volume elasticity of 1.2. To accommodate greater volume, hospitals increased nurse employment, but also lowered length of stay, with ambiguous effects on quality.
Dependent Insurance Coverage and Parental Job Mobility: Evidence from the Affordable Care Act
with Hannah Bae and Katherine Meckel. Latest version June 2024.
Revise and resubmit, Journal of Public Economics
Research Question: How does extending health insurance coverage to young adults affect their parents' labor supply?
Abstract: A common feature of employer-sponsored insurance is coverage for dependents. While prior work shows that employees trade off job mobility for their own coverage, there is less evidence on the intra-family spillovers of dependent coverage onto parental labor supply. We study this using a panel of insurance claims that links dependent insurance enrollment with a proxy for parental job tenure. We develop a regression discontinuity design that exploits variation in coverage eligibility by dependent birth date from the Affordable Care Act. We find that a one percent increase in the dependent enrollment likelihood increases parental job retention by 0.20 percent.
Managing Margins: PE Effects on Financial, Physical, and Human Capital
with Michael Richards and Chris Whaley. Latest version August 2024.
Abstract: Private equity (PE) plays an increasingly important role in the modern US economy. However, its impacts on owned-firms are incompletely understood. We exploit a historically large leveraged buyout of a national hospital chain to examine how the full life cycle of PE influences hospital-level revenues, technology sourcing, labor use, and financial performance. We find permanent improvements in hospital volumes and revenues. PE also reduces growth in fulltime employees, with a suggestive partial substitution toward parttime workers. Technology adoption is restrained, but the number of vendors expands. Overall, PE has nuanced effects on hospital management, which translate to improved operating margins.
Economic Shocks and Healthcare Capital Investments
with Michael Richards and Chris Whaley. Latest version February 2025.
Abstract: Information technology (IT) can enhance firms’ long-run performance but is also a risky investment, with high fixed costs and uncertain returns. Whether market events influence this tradeoff has received limited attention. We leverage the healthcare context to empirically examine hospitals’ IT investments following economic downturns and public insurance expansions––i.e., large industry shocks in opposite directions. We find novel and symmetrical responses. Recessions restrain investments while expansion policy indirectly stimulates them. Importantly, the IT margin is more elastic than other spending responses to market fluctuations. Supplementary analyses suggest that hospitals’ finances and perceptions of uncertainty drive these capital investment adjustments.
Screening Through Soft Spending Limits: Evidence from the Medicare Therapy Cap
with Ashvin Gandhi. Latest version April 2025.
[NBER WP]
Abstract: Governments and firms often employ soft spending limits to restrict overspending while still allowing exceptions on a case-by-case basis. This paper studies a Medicare policy which capped per-patient physical therapy spending, with exceptions for patients with documented medical need. The cap reduced spending by 8 percent without harming patient health, with the targeting improvements driven by Medicare discretion in granting exceptions rather than improved provider screening. However, the documentation requirement also introduced horizontal inequity: conditional on need, lower-income and minority patients were more likely to be screened out, as they tended to see providers with poorer documentation practices.
Predictably Unpredictable: Inspections and Quality in Health Care
with Ashvin Gandhi and Andrew Olenski.
Research Question: How can we optimize the design of nursing home inspections to improve patient health outcomes?
Research Question: How does the fragmentation of administrative and billing processes in health care affect patients and providers?
Effects of Nursing Home Payment on Patient-Centered Outcomes
with Tal Gross, Adam Sacarny, and David Silver.
Research Question: How do nursing homes respond to changes in payment, and how does this affect patient health outcomes?