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Healthcare and Finance

Paper Session

Friday, Jan. 6, 2023 8:00 AM - 10:00 AM (CST)

Hilton Riverside, Grand Salon B Sec 12
Hosted By: American Economic Association
  • Chairs:
    Pinar Karaca-Mandic, University of Minnesota
  • Richard Thakor, University of Minnesota

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

Cyrus Aghamolla
,
University of Minnesota
Pinar Karaca-Mandic
,
University of Minnesota
Xuelin Li
,
University of South Carolina
Richard Thakor
,
University of Minnesota

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.

Private Equity in the Hospital Industry

Janet Gao
,
Indiana University
Yongseok Kim
,
Indiana University
Merih Sevilir
,
Halle Institute for Economic Research and ESMT-Berlin

Abstract

We examine employment and patient outcomes at hospitals acquired by private equity (PE) firms and PE-backed hospitals. While employment declines at PE-acquired hospitals, core medical workers (physicians, nurses, and pharmacists) increase significantly. The proportion of wages paid to core workers increases at PE-acquired hospitals whereas the proportion paid to administrative employees declines. These results are most pronounced for deals where the acquirers are publicly traded PE-backed hospitals. Non-PE-backed acquirers also cut employment but do not increase core workers or reduce administrative expenditures. Finally, PE-backed acquirers are not associated with worse patient satisfaction or mortality rates compared to their non-PE-backed counterparts.

Bank Presence and Health

Kim Fe Cramer
,
London School of Economics

Abstract

What role does bank presence play in improving health? To explore this question, I use a policy of the Reserve Bank of India from 2005 that incentivizes banks to set up new branches in underbanked districts, defined as having a population-to-branch ratio larger than the national average. In a regression discontinuity design, I compare households in districts just above and just below the national average. Six years after the policy introduction, households in treatment districts are a third less likely to be affected by an illness in a month. They miss fewer days of work or school due to an illness and have lower medical expenses. Ten years after the policy was introduced, I observe persistently lower morbidity rates, higher vaccination rates, and lower risks associated with pregnancies. I provide evidence that two previously understudied aspects of banking contribute to the effect: households gain access to health insurance and health care providers gain access to credit. In equilibrium, I observe an increase in health care demand and supply.

Discussant(s)
Adam Sacarny
,
Columbia University
Janis Skrastins
,
Washington University-St. Louis
Matthew Grennan
,
University of California-Berkeley
JEL Classifications
  • I1 - Health
  • G3 - Corporate Finance and Governance