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

104 Pages Posted: 26 Apr 2021 Last revised: 2 Jan 2023

See all articles by Cyrus Aghamolla

Cyrus Aghamolla

Rice University

Pinar Karaca-Mandic

University of Minnesota - Twin Cities - School of Public Health

Xuelin Li

Columbia University

Richard T. Thakor

University of Minnesota - Carlson School of Management; Massachusetts Institute of Technology (MIT) - Laboratory for Financial Engineering

Multiple version iconThere are 3 versions of this paper

Date Written: April 2021

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.

Suggested Citation

Aghamolla, Cyrus and Karaca-Mandic, Pinar and Li, Xuelin and Thakor, Richard T., Merchants of Death: The Effect of Credit Supply Shocks on Hospital Outcomes (April 2021). NBER Working Paper No. w28709, Available at SSRN: https://ssrn.com/abstract=3834149

Cyrus Aghamolla (Contact Author)

Rice University

6100 South Main Street
MS-531
Houston, TX 77005-1892
United States

Pinar Karaca-Mandic

University of Minnesota - Twin Cities - School of Public Health ( email )

15-223 Phillips-Wangensteen Building
Box 729, 420 Delaware Street SE
Minneapolis, MN 55455-0392
United States

Xuelin Li

Columbia University ( email )

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New York, NY 10027
United States

Richard T. Thakor

University of Minnesota - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

Massachusetts Institute of Technology (MIT) - Laboratory for Financial Engineering ( email )

100 Main Street, E62-618
Cambridge, MA 02142
United States

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