Association for Public Policy Analysis & Management

Panel: Supply-Side Responses to Healthcare Regulation and Markets

(Health Policy)

The goal to reduce costs while improving quality of care has been a pillar of US health care reform. However, the related literature to date is heavily focused on demand-side consequences, leaving supply-side considerations less well-understood. This panel will consider how health care regulation and markets affect providers, including hospitals, physicians, and nurses. The first paper in our panel considers how markets impact hospitals. Over the last decade, the hospital market has become more consolidated, due in part to policies that encourage coordination across provider networks. This paper examines the effect of mergers and system joinings on the wages and employment levels of both registered nurses and licensed practical nurses. Using data from the American Hospital Association’s Annual Survey, the author studies whether competitive conduct decreases as the number of firms decrease and specifically at what number of firms a monopsonistic market begins to appear. The second paper further examines how a more consolidated network can affect physician behavior. Accountable Care Organizations (ACOs) stand out for the attention they have received, and they represent a structure of coordinated care where financial payouts incentivize improved health outcomes at lower costs. This paper uses the quasi-random assignment of beneficiaries to ACOs to identify how physician treatment patterns change when a subset of patients are affected by a change in financial incentives. Physicians either remake their entire practice according to the dominant payer arrangement, or they target their response to the financial incentive associated with each patient. Another way to encourage coordinated care is through interdisciplinary physician and midwife training programs. Our third paper considers how the co-location of obstetric (OBs) and midwife training programs affect the cross-disciplinary collaboration in the provision of childbirth services. The authors propose that in geographic areas with little cooperation between OBs and midwives, OBs may deliver both low and high-risk patients. Alternatively, in an area with efficient collaboration, OBs are likely to focus their practice on delivering more complex births that require their expertise relative to midwives. Finally, the last paper on this panel focuses on the market and regulatory impact on nurses. One perceived key ingredient for ensuring hospital quality is a robust nursing staff, and registered nurses (RNs) comprise nearly 3 million members of the US labor force. In 1999, California became the first and only state to mandate that hospitals maintain specific minimum nurse-to-patient ratios in all departments. The authors use this quasi-natural experiment, along with nursing workforce data from all US states, to estimate the effects of a hospital staffing mandate on labor market outcomes. They find strong evidence of a positive wage effect, which drew more nurses to the state and generated spillovers onto employment in non-hospital settings. Coupled with the largely absent changes in hospital quality, their results suggest that regulating hospital hiring decisions is likely to alter local labor markets but may do relatively little for actually improving the quality of services delivered.