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

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.

Note:
Funding Information: None to declare.

Declaration of Interests: None to declare.

Keywords: Healthcare finance, hospitals, banks, credit supply, lending, health outcomes, stress test

JEL Classification: G21, G31, G32, I11, I15