Healthcare Exceptionalism? Productivity and Allocation in the U.S. Healthcare Sector

76 Pages Posted: 3 Jul 2013 Last revised: 8 Oct 2014

See all articles by Amitabh Chandra

Amitabh Chandra

Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Amy Finkelstein

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Adam Sacarny

Columbia University

Adam Sacarny

Massachusetts Institute of Technology (MIT) - Department of Economics

Chad Syverson

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Date Written: July 2013

Abstract

The conventional wisdom in health economics is that large differences in average productivity across hospitals are the result of idiosyncratic, institutional features of the healthcare sector which dull the role of market forces. Strikingly, however, we find that productivity dispersion in heart attack treatment across hospitals is, if anything, smaller than in narrowly defined manufacturing industries such as ready-mixed concrete. While this fact admits multiple interpretations, we also find evidence against the conventional wisdom that the healthcare sector does not operate like an industry subject to standard market forces. In particular, we find that hospitals that are more productive at treating heart attacks have higher market shares at a point in time and are more likely to expand over time. For example, a 10 percent increase in hospital productivity today is associated with about 4 percent more patients in 5 years. Taken together, these facts suggest that the healthcare sector may have more in common with "traditional" sectors than is often assumed.

Suggested Citation

Chandra, Amitabh and Finkelstein, Amy and Sacarny, Adam and Sacarny, Adam and Syverson, Chad, Healthcare Exceptionalism? Productivity and Allocation in the U.S. Healthcare Sector (July 2013). NBER Working Paper No. w19200, Available at SSRN: https://ssrn.com/abstract=2289110

Amitabh Chandra (Contact Author)

Harvard University - Harvard Kennedy School (HKS) ( email )

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National Bureau of Economic Research (NBER)

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IZA Institute of Labor Economics

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Amy Finkelstein

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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Adam Sacarny

Columbia University ( email )

Adam Sacarny

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
E52-391
Cambridge, MA 02142
United States

Chad Syverson

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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