Productivity and Performance in Healthcare

Paper Session

Friday, Jan. 6, 2017 10:15 AM – 12:15 PM

Hyatt Regency Chicago, Regency C
Hosted By: American Economic Association
  • Chair: Renata Lemos, World Bank

Healthy Business? MBA Education and Management in Healthcare

Nicholas Bloom
,
Stanford University
Renata Lemos
,
World Bank
Raffaella Sadun
,
Harvard University
John Van Reenen
,
Massachusetts Institute of Technology

Abstract

We investigate the link between managers’ education and hospital performance in healthcare by collecting a large database of management practices and skills in hospitals in Brazil, Canada, France, Germany, India, Italy, Sweden, the UK and the US. We geocode locations of 1,800 hospitals and calculate distances to universities in the World Higher Education Database. We find that hospitals with a higher share of managers who have attended a MBA-type course are associated with higher management quality on average. We also show that hospitals located more closely to universities hosting both medical schools and business schools are associated with higher management quality, less so than universities hosting one or the other. Supplying MBA-type courses catered for medical students or healthcare management courses to business students may be a potential channel into which distance to these universities affects the share of hospital managers with business skills and management quality at the hospital. We confirm the robustness of our results by running a placebo test using distance to universities specializing solely on arts, humanities or religious degrees and therefore not offering MBA-type courses. With all caveats, our preliminary analysis shows that using variation in the driving distance to these universities in an instrumental variables approach suggests that a higher share of managers with MBA-type courses results in higher hospital management quality.

Uncertainty, Tacit Knowledge, and Practice Variation: Evidence From Physicians in Training

David Chan
,
Stanford University

Abstract

Studying physicians in training, I investigate how uncertainty and tacit knowledge may give rise to significant practice variation. Consistent with tacit knowledge accruing only with experience, and empirically exploiting a discontinuity in the formation of teams, experience relative to a peer substantially increases the size of variation attributable to the physician trainees. Among the same physician trainees, convergence occurs for patients on services driven by specialists, where there is arguably more explicit knowledge, but not on the general medicine service. This difference is unexplained by formally coded patient information. In contrast, rich physician characteristics correlated with preferences and ability, and quasi-random assignments to high- or low-spending supervising physicians explain little if any variation.

Overconfidence, Productivity, and the Diffusion of Medical Technology

Diego Comin
,
Dartmouth College
Jonathan Skinner
,
Dartmouth College
Douglas Staiger
,
Dartmouth College

Abstract

A variety of optimizing and non-optimizing models explain why new technologies such as hybrid corn, agricultural fertilizer, and new medical treatments diffuse so slowly. A common characteristic of these models is that agents (or countries) quickest to diffuse do so because they are more productive in using the new technology; the debate is around why others are so slow. In this paper, we develop a nested model of diffusion and learning with heterogeneous agents that allows for both the conventional explanation for rapid diffusion, and an alternative explanation: overconfidence in both the agent's knowledge to apply the new technology beneficially, and her skill in implementation. In the rational model, technology will diffuse most rapidly for the most productive agents, but overconfidence can generate a reversal, with the least productive exhibiting the most rapid diffusion, leading to diminished aggregate benefit from the innovation. We test the model using a unique registry data for implantable defibrillators (ICDs) during 2006-13, a medical device that in 2006 was approved to help prevent cardiac death in patients with weakened hearts (congestive heart failure). We find evidence of considerable variability across hospitals and regions in diffusion, with those exhibiting the most rapid rate also exhibiting below-average knowledge and skill. We also find limited learning-by-doing: Over time, there were fewer inappropriate procedures, but no evidence of improved physician skills. These results suggest caution in equating rapid diffusion to productivity gains, particularly in health care.

Private Provision of Social Insurance: Drug-Specific Price Elasticities and Cost Sharing in Medicare Part D

Liran Einav
,
Stanford University
Amy Finkelstein
,
Massachusetts Institute of Technology
Maria Polyakova
,
Stanford University

Abstract

Standard theory suggests that optimal consumer cost-sharing in health insurance increases with the price elasticity of demand, yet publicly-provided drug coverage typically involves uniform cost-sharing across drugs. We investigate how private drug plans set cost-sharing in the context of Medicare Part D. We document substantial heterogeneity in the price elasticities of demand across more than 150 drugs and across more than 100 therapeutic classes, as well as substantial heterogeneity in the cost-sharing for different drugs within privately-provided plans. We find that private plans set higher consumer cost-sharing for drugs or classes with more elastic demand. Our findings suggest that benefit design may be more efficient in privately rather than publicly provided insurance.
JEL Classifications
  • D2 - Production and Organizations
  • I1 - Health