Daifeng He

Why do firms make and buy? Efficiency, appropriability and competition in the trucking industry

Most literature examining firms’ make and buy decisions fails to explore when firms use both governance structures for similar transactions. We examine this phenomenon in the trucking industry, where it is common for a carrier to use both employee drivers and outsourcing at the same time. We argue that efficiency, appropriability and competition concerns lead carriers to organize on a haul-by-haul basis.We empirically examine our theory using a unique data from a small trucking firm in St Louis, MO, and find broad support for our hypotheses.We also discuss the possibility of alternative explanations of market power, capacity constraint, agency theory and property right theory for the use of make and buy. We conclude that these theories do not explain this phenomenon in the trucking industry. Thus, we conclude that it is the interaction of efficiency, appropriability and competition concerns that drive the decision to make and buy in the trucking industry.We further postulate that these concerns can manifest themselves in other industries, suggesting that our theory has applicability beyond trucking.

Physician responses to rising local unemployment rates: Healthcare provision to Medicare and privately insured patients

Prior studies suggest that hospital care is countercyclical among Medicare beneficiaries, and if anything, procyclical among the non-elderly. In this paper, we provide the first physician-level analysis of changes in healthcare provision to Medicare and privately insured patients across the business cycle. Using Florida discharge data aggregated to the physician level, we find that as county unemployment rates increase, physicians treat fewer privately insured patients in both inpatient and outpatient settings. In contrast, physicians who are more exposed to income losses during recessions provide more care to Medicare patients as the unemployment rate rises. Further analysis suggests that easing capacity constraints may contribute to this rise in Medicare volume; however, even in areas that are not capacity constrained, care provided to Medicare patients remains countercyclical among physicians with a large share of privately insured patients. This pattern is consistent with demand inducement in response to a negative income shock.

Public Reporting and Demand Rationing: Evidence from the Nursing Home Industry: DEMAND RATIONING AND PUBLIC REPORTING

This paper examines an under-explored unintended consequence of public reporting: the potential for demand rationing. Public reporting, although intended to increase consumer access to high-quality products, may have provided the perverse incentive for high-quality providers facing fixed capacity and administrative pricing to avoid less profitable types of residents. Using data from the nursing home industry before and after the implementation of the public reporting system in 2002, we find that high-quality nursing homes facing capacity constraints reduced admissions of less profitable Medicaid residents while increasing the more profitable Medicare and private-pay admissions, relative to low-quality nursing homes facing no capacity constraints. These effects, although small in magnitude, are consistent with provider rationing of demand on the basis of profitability and underscore the important role of institutional details in designing effective public reporting systems for regulated industries.

Racial and Ethnic Disparities in the Surgical Treatment of Acute Myocardial Infarction: The Role of Hospital and Physician Effects

Many studies document disparities between Blacks and Whites in the treatment of acute myocardial infarction on controlling for patient demographic factors and comorbid conditions. Other studies provide evidence of disparities between Hispanics and Whites in cardiac care. Such disparities may be explained by differences in the hospitals where minority and nonminority patients obtain treatment and by differences in the traits of physicians who treat minority and nonminority patients. We used 1997-2005 Florida hospital inpatient discharge data to estimate models of cardiac catheterization, percutaneous transluminal coronary angioplasty, and coronary artery bypass grafting in Medicare fee-for-service patients 65 years and older. Controlling for hospital fixed effects does not explain Black–White disparities in cardiac treatment but largely explains Hispanic–White disparities. Controlling for physician fixed effects accounts for some extent of the racial disparities in treatment and entirely explains the ethnic disparities in treatment.

The Role of Medical Expenditure Risk in Portfolio Allocation Decisions.

Economic theory suggests that medical spending risk affects the extent to which households are willing to accept financial risk, and consequently their investment portfolios. In this study, we focus on the elderly for whom medical spending represents a substantial risk. We exploit the exogenous reduction in prescription drug spending risk because of the introduction of Medicare Part D in the U.S. in 2006 to identify the causal effect of medical spending risk on portfolio choice. Consistent with theory, we find that Medicare-eligible persons increased risky investment after the introduction of prescription drug coverage, relative to a younger, ineligible cohort. Copyright

Do changes in hospital outpatient payments affect the setting of care

OBJECTIVE To examine whether decreases in Medicare outpatient payment rates under the Outpatient Prospective Payment System (OPPS) caused outpatient care to shift toward the inpatient setting. DATA SOURCES/STUDY SETTING Hospital inpatient and outpatient discharge files from the Florida Agency for Health Care Administration from 1997 through 2008. STUDY DESIGN This study focuses on inguinal hernia repair surgery, one of the most commonly performed surgical procedures in the United States. We estimate multivariate regressions of inguinal hernia surgery counts in the outpatient setting and in the inpatient setting. The key explanatory variable is the time-varying Medicare payment rate specific to the procedure and hospital. Control variables include time-varying hospital and county characteristics and hospital and year-fixed effects. PRINCIPAL FINDINGS Outpatient hernia surgeries fell in response to OPPS-induced rate cuts. The volume of inpatient hernia repair surgeries did not increase in response to reductions in the outpatient reimbursement rate. CONCLUSIONS Potential substitution from the outpatient setting to the inpatient setting does not pose a serious threat to Medicares efforts to contain hospital outpatient costs.

Public Reporting and Demand Rationing: Evidence from the Nursing Home Industry

This paper examines an under‐explored unintended consequence of public reporting: the potential for demand rationing. Public reporting, although intended to increase consumer access to high‐quality products, may have provided the perverse incentive for high‐quality providers facing fixed capacity and administrative pricing to avoid less profitable types of residents. Using data from the nursing home industry before and after the implementation of the public reporting system in 2002, we find that high‐quality nursing homes facing capacity constraints reduced admissions of less profitable Medicaid residents while increasing the more profitable Medicare and private‐pay admissions, relative to low‐quality nursing homes facing no capacity constraints. These effects, although small in magnitude, are consistent with provider rationing of demand on the basis of profitability and underscore the important role of institutional details in designing effective public reporting systems for regulated industries. Copyright

Medicare Payment and Hospital Provision of Outpatient Care to the Uninsured.

OBJECTIVE To describe the amount of hospital outpatient care provided to the uninsured and its association with Medicare payment rate cuts following the implementation of Medicares Outpatient Prospective Payment System. DATA SOURCES/STUDY SETTING We use hospital outpatient discharge records from Florida from 1997 through 2008. STUDY DESIGN We estimate multivariate regression models of hospital outpatient care provided to the uninsured in separate samples of nonprofit and for-profit hospitals. PRINCIPAL FINDINGS Hospital outpatient departments provide significant amounts of care to the uninsured. As Medicare payment rates fall, total charges and the share of charges for outpatient visits by the uninsured decrease at nonprofit hospitals. At for-profit hospitals, the share of outpatient care provided to uninsured patients increases, but there is no significant change in the number of uninsured discharges. CONCLUSIONS Nonprofit and for-profit hospitals respond differently to reductions in Medicare payments; thus, studies of the impact of legislated Medicare payment cuts on care of the uninsured should account for differences in hospital ownership in communities. Given that outpatient care to the uninsured includes preventive and diagnostic care procedures, reductions in this care following payment cuts may adversely affect long-run health and health care costs in communities dominated by nonprofit hospitals.

Does Labor Force Participation Reduce Informal Caregiving

This paper examines the causal impact of labor force participation on informal caregiving. To address the endogeneity of labor force participation, we exploit local business cycles and instrument for individual labor force participation with state unemployment rates. Using data from the Survey of Income and Program Participation (SIPP), we find that labor force participation significantly reduces informal caregiving. Among women, working an additional 10 hours per week reduces the probability of providing informal care by 12.5 percentage points and reduces the number of care hours by 32 percent. We also find that the effect of labor force participation is stronger among women with low income and wealth, who are the most important target of many welfare policies that promote labor force participation. Our results imply that demographic trends and work-promoting policies have the unintended consequence of reducing informal caregiving in an aging society that faces rising demand for informal care.

Consumer Response to Composite Ratings of Nursing Home Quality

Health-care report cards are intended to address information asymmetries and enable consumers to choose providers of better quality. However, the form of the information may matter to consumers. Nursing Home Compare, a website that publishes report cards for nursing homes, went from publishing a large set of indicators to a composite rating in which nursing homes are assigned one to five stars. We evaluate whether the simplified ratings motivated consumers to choose better-rated nursing homes. We use a regression discontinuity design to estimate changes in new admissions six months after the publication of the ratings. Our main results show that nursing homes that obtained an additional star gained more admissions, with heterogeneous effects depending on baseline number of stars. We conclude that the form of quality reporting matters to consumers, and that the increased use of composite ratings is likely to increase consumer response.