Healthcare across Boundaries: Urban-Rural Differences in the Consequences of Telehealth Adoption
94 Pages Posted: 19 Mar 2021 Last revised: 23 May 2023
Date Written: February 1, 2021
We study the impacts of telehealth adoption on geographic competition among urban and rural healthcare providers. We consider a quasi-natural experiment: states' entry into the Interstate Medical Licensure Compact, wherein the entry events facilitate healthcare providers to adopt telehealth technology. By analyzing a representative sample of providers, we first establish the Compact-entry shock's validity and its positive effect on the supply of medical services. We then report evidence that there are service and payment shifts from rural providers to urban providers, i.e., urban providers are more likely to benefit from the Compact-entry financially. Relying on patients' telehealth reimbursement claim data, we observe two mechanisms contributing to the revenue re-distribution: the substitution and gateway effects of telehealth. Finally, we show that telehealth readiness and service quality moderate the impact of telehealth adoption. These findings speak to both potentially positive and negative consequences for welfare.
Keywords: Telehealth, Physician Licensure, Medicare Payment, Hospitals, Healthcare Qualities, Telemedicine
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