H. E. Frech

Property Rights and Wages: The Case of Nursing Homes

In this paper we develop the implications of the property rights theory of the firm for wage determination and test the model using data from the U.S. nursing home industry. The main theoretical prediction is that any attenuation of property rights will lead to higher wage rates for the firms employees. The empirical evidence indicates that, indeed, profit-maximizing nursing homes do pay the lowest wage rates (for given quality labor), and that the stronger the cost-minimizing incentives provided by Medicaid reimbursement programs, the lower the wage rate paid by these nursing homes.

Is There a Link Between Pharmaceutical Consumption and Improved Health in OECD Countries

AbstractObjective: The objective of this study was to determine whether there is a measurable health return associated with high pharmaceutical consumption in a sample of developed countries. Design and setting: The study focused on the production of health, disaggregating healthcare into pharmaceuticals and other healthcare. We controlled for wealth and lifestyle factors. The sample consisted of 21 Organization for Economic Cooperation and Development (OECD) countries and the measure of pharmaceutical consumption used was the best available for a large number of OECD countries. We proxied health with life expectancies at birth, at age 40, and age 60. Main outcome measures and results: Pharmaceutical consumption had a positive and statistically significant effect on remaining life expectancy at age 40 and 60 years (significant at the 0.10 and 0.05 level, respectively, based on a 2-tailed test), although the effect on life expectancy at birth was small and not significant. Sensitivity analysis showed that these results were generally robust. A significant effect of pharmaceutical consumption on infant mortality was not demonstrated and results of the infant mortality model were very sensitive to small changes. Conclusion: Increased pharmaceutical consumption helps improve mortality outcomes, especially for those at middle age and older.

Spatial Interaction, Spatial Multipliers and Hospital Competition

Abstract The hospital competition literature shows that estimates of the effect of local market structure (concentration) on pricing (competition) are sensitive to geographic market definition. Our spatial lag model approach effects smoothing of the explanatory variables across the discrete market boundaries, resulting in robust estimates of the impact of market structure on hospital pricing, which can be used to estimate the full effect of changes in prices inclusive of spillovers that cascade through the neighboring hospital markets. The full amount, generated by the spatial multiplier effect, is a robust estimate of the impacts of market factors on hospital competition. We contrast ordinary least squares and spatial lag estimates to demonstrate the importance of robust estimation in analysis of hospital market competition. In markets where concentration is relatively high before a proposed merger, we demonstrate that Ordinary Least Squares (OLS) can lead to the wrong policy conclusion while the more conservative lag estimates do not.

Resolving the impasse on hospital scale economics: a new approach

The existence of scale economies in hospitals in important for both public and managerial policy, yet production and cost function studies have found conflicting evidence. More recently, more sophisticated studies have typically found scale diseconomies, which is inconsistent with the views of industry participants and observers. In the early 1980s. California deregulated both private and public health insurance (Medical), which provides a natural laboratory for examining hospital efficiency. Using Stiglers original and multivariate survivor analysis, we resolve the conflict in favour of scale economies, and reconcile the controversy. The survivorship methodology in simple to apply, and a useful tool in conjunction with statistical cost and production studies.

Health Care in America: The Political Economy of Hospitals and Health Insurance

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Pricing of Pollution: The Coase Theorem in the Long Run

In an earlier article in The Bell Journal, Tybout argues that even in a zero transaction costs model, bribery to reduce pollution and compensation charges for it result in different total profits, and thus in different long-run behavior. Therefore, the Coase Theorem is refuted for the long-run case.

The effects of pharmaceutical consumption and obesity on the quality of life in the Organization of Economic Cooperation and Development (OECD) countries

AbstractObjective: The objective of this study is to validate our earlier work on life expectancy with more recent data and, more importantly, to extend it to examine quality of life, not only the length of life. Design and setting: The analysis focuses on the production of health, disaggregating healthcare into pharmaceutical consumption and other healthcare. Going beyond our earlier work, measures of health include life expectancy and disability-adjusted life expectancy (DALE). Also, we consider the impact of obesity. The sample was 18 Organization of Economic Cooperation and Development (OECD) countries. The measure of pharmaceutical consumption is the best that is available for these countries. Main outcome measures and results: Confirming our earlier work, pharmaceutical consumption has a positive and statistically significant effect on life expectancy at 40 and 60 years (significant at the 0.05 level, based on a two-tailed test). The effects are slightly larger than in the earlier work. Turning to DALE, pharmaceutical consumption has a positive and statistically significant effect at birth and at 60 years (significant at the 0.05 and 0.01 levels, respectively), based on a two-tailed test. The effects on DALE are larger than the effects on life expectancy. Conclusions: Increased pharmaceutical consumption helps improve quality of life, as well as life expectancy.

Prison Health Care: Is Contracting Out Healthy?

US prison health care has recently been in the news and in the courts. A particular issue is whether prisons should contract out for health care. Contracting out has been growing over the past few decades. The stated motivation for this change ranges from a desire to improve the prison healthcare system, sometimes in response to a court mandate, to a desire to reduce costs. This study is a first attempt to quantify the impact of this change on inmate health. As morbidity measures are not readily obtainable, we focus on mortality. More specifically, we use a panel of state prisons from 1979 to 1990 and a fixed effects Poisson model to estimate the change in mortality associated with increase in the percentage of medical personnel employed under contract. In contrast to the first stated aim of contracting, we find that a 13% increase in percentage of medical personnel employed under contract increases mortality by 1.3%.

Is the United States an outlier in health care and health outcomes? A preliminary analysis*

U.S. health care is often seen as an outlier, with high costs and only middling outcomes. This view implies a household production function for health, with both health care and lifestyle serving as inputs. Building on earlier work by Miller and Frech (2004), we make this argument explicit by estimating a production function from augmented OECD data. This allows us to determine whether the U.S. is literally an outlier; which turns on whether the United States is very far off the production surface. We find that the Unites States is somewhat less productive than the average OECD country, but that a substantial part of the observed difference results from poor lifestyle choices, particularly obesity.

The Rise of Private Health Insurance in Australia: Early Effects on Insurance and Hospital Markets

Over a three year period from July 1997 to July 2000, the Australian government introduced a series of policies designed to increase the proportion of the population with private health insurance. The combined effect of the policies was an increase in the population coverage from a low point of 30.1 percent to 45.7 percent. The motivation for these policies was to force more Australians to use the private sector for their hospital care and in so doing reduce the pressure on the public sector. We piece together fragmentary early data from various sources and various time periods. We find that the increase in activity in the private hospital sector and the reduction in public hospital waiting times has indeed occurred.