Identifying the Health Production Function: The Case of Hospitals

39 Pages Posted: 5 Oct 2013

See all articles by John Romley

John Romley

Price School of Public Policy, University of Southern California; University of Southern California - Schaeffer Center for Health Policy and Economics

Neeraj Sood

University of Southern California; National Bureau of Economic Research (NBER); RAND Corporation; University of Southern California - Schaeffer Center for Health Policy and Economics

Date Written: October 2013

Abstract

Estimates of the returns to medical care may reflect not only the efficacy of more intensive care, but also unmeasured differences in patient severity or the productivity of health-care providers. We use a variety of instruments that are plausibly orthogonal to heterogeneity among providers as well as patients to analyze the intensity of care and 30-day survival among Medicare patients hospitalized for heart attack, congestive heart failure and pneumonia. We find that the intensity of care is endogenous for two out of three conditions. The elasticity of 30-day mortality with respect to care intensity increases in magnitude from -0.27 to -0.71 for pneumonia and from -0.16 to -0.33 for congestive heart failure, when we address the identification problem. This finding is consistent with the hypotheses that care intensity at hospitals tends to decrease with hospital productivity, or increase with unmeasured patient severity.

Suggested Citation

Romley, John and Sood, Neeraj, Identifying the Health Production Function: The Case of Hospitals (October 2013). NBER Working Paper No. w19490. Available at SSRN: https://ssrn.com/abstract=2336356

John Romley (Contact Author)

Price School of Public Policy, University of Southern California ( email )

USC Schaeffer Center, Verna & Peter Dauterive Hall
635 Downey Way
Los Angeles, CA CA 90089-3333
United States

University of Southern California - Schaeffer Center for Health Policy and Economics ( email )

635 Downey Way
Los Angeles, CA 90089-3333
United States

Neeraj Sood

University of Southern California ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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RAND Corporation ( email )

P.O. Box 2138
1776 Main Street
Santa Monica, CA 90407-2138
United States

University of Southern California - Schaeffer Center for Health Policy and Economics ( email )

635 Downey Way
Los Angeles, CA 90089-3333
United States

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