Hospital Financial Health and Clinical Choices: Evidence From the Financial Crisis

51 Pages Posted: 14 Oct 2018 Last revised: 18 Aug 2019

See all articles by Manuel Adelino

Manuel Adelino

Duke University; Duke Innovation & Entrepreneurship Initiative; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Katharina Lewellen

Dartmouth College - Tuck School of Business

W. Ben McCartney

Purdue University - Krannert School of Management; Duke University - Finance

Date Written: August 16, 2019

Abstract

Financial constraints can cause firms to reduce product quality when quality is difficult to observe. We test this hypothesis in the context of medical choices at hospitals. Using heart attacks and child deliveries, we ask whether hospitals shift towards more profitable treatment options after a financial shock—the 2008 financial crisis. The crisis was followed by an unprecedented drop in hospital investments, yet the aggregate trends show no discrete shifts in treatment intensity post 2008. For cardiac treatment (but not for child deliveries), we find evidence that hospitals with larger financial losses during the financial crisis subsequently increased their use of intensive treatments relative to hospitals with smaller losses, consistent with the effects of financing constraints.

Keywords: Hospitals, Financing Constraints, Nonprofits, Medical Choices

JEL Classification: G30, I11

Suggested Citation

Adelino, Manuel and Lewellen, Katharina and McCartney, W. Ben, Hospital Financial Health and Clinical Choices: Evidence From the Financial Crisis (August 16, 2019). Available at SSRN: https://ssrn.com/abstract=3224667 or http://dx.doi.org/10.2139/ssrn.3224667

Manuel Adelino

Duke University ( email )

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Katharina Lewellen (Contact Author)

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

W. Ben McCartney

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

Duke University - Finance ( email )

Durham, NC 27708-0120
United States

HOME PAGE: http://duke.edu/~wbm5

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