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  5. Merchants of Death: The Effect of Credit Supply Shocks on Hospital Outcomes

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Merchants of Death: The Effect of Credit Supply Shocks on Hospital Outcomes

  • Cyrus Aghamolla
  • Pinar Karaca-Mandic
  • Xuelin Li
  • Richard T. Thakor
American Economic Review (Forthcoming)

Abstract

This study examines the link between credit supply and hospital health outcomes. We use bank stress tests as exogenous shocks to credit access for hospitals that have lending relationships with tested banks. We find that affected hospitals shift their operations to increase resource utilization following a negative credit shock but reduce the quality of their care to patients across a variety of measures, including a significant increase in risk-adjusted readmission and mortality rates. The results indicate that access to credit can affect the quality of healthcare hospitals deliver, pointing to important spillover effects of credit market frictions on health outcomes.

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