Panel Paper: Capacity and Utilization In Health Care: The Effect of Empty Beds On NICU Admission

Thursday, November 8, 2012 : 10:15 AM
International C (Sheraton Baltimore City Center Hotel)

*Names in bold indicate Presenter

Seth Freedman, Indiana University

This paper uses exogenous variation in the availability of Neonatal Intensive Care Units (NICUs) to estimate the effect of available capacity of a medical resource on its utilization. Because overall trends in utilization are jointly determined by both supply and demand, I propose a measure of short term variation in supply that is unlikely to be correlated with unobserved demand determinants. Using hospital discharge data from California and New York, I exploit within hospital-month variation in the number of vacant NICU beds in an infant's delivery hospital the day prior to birth. In hospital specific-month fixed effect regressions, I find that on average the number of available NICU beds increases the likelihood of NICU admission. Disaggregating this effect by birth weight reveals that the effect is very small for very low birth weight infants (less than 1,500 grams), but jumps discretely above this threshold and is large for low birth weight infants (1,500 to 2,500 grams). I also provide evidence that these results are not driven by the refusal of necessary care when units are capacity constrained and suggestive evidence on the effects of available capacity on cost of care and mortality.