Healthcare Exceptionalism? Performance and Allocation in the U.S. Healthcare Sector
The conventional wisdom in health economics is that idiosyncratic features of the healthcare sector leave little scope for market forces to allocate consumers to higher performance producers. However, we find robust evidence across a variety of conditions and performance measures that higher quality hospitals tend to have higher market shares at a point in time and expand more over time. Moreover, we find that the relationship between performance and allocation is stronger among patients who have greater scope for hospital choice, suggesting a role for patient demand in allocation in the hospital sector. Our findings suggest that the healthcare sector may have more in common with “traditional” sectors subject to standard market forces than is often assumed.
This paper presents entirely new research based off earlier work released as NBER Working Paper 19200. We are grateful to Daron Acemoglu, Nick Bloom, Iain Cockburn, Chris Conlon, Angus Deaton, Mark Duggan, Joe Doyle, Liran Einav, Matthew Gentzkow, Michael Greenstone, Jonathan Gruber, Ben Olken, Jonathan Skinner, Doug Staiger, Scott Stern, Heidi Williams, numerous seminar participants, and to Maurice Dalton and Nivedhitha Subramanian for expert research assistance. We gratefully acknowledge funding from the National Institute on Aging: P01 AG005842 and P01 AG019783 (Chandra), R01 AG032449 (Finkelstein) and T32-AG000186 (Sacarny). The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
The author serves on the Panel of Health Advisors of the Congressional Budget Office (CBO). He is also a consultant for Precision Health Economics, a for-profit consulting firm, but the company has no financial interest in this paper.
Outside Professional Activities For Amitabh Chandra Disclosures for 2014:
Congressional Budget Office (Federal Government). Panel of Health Advisors. Unpaid.
Review of Economics and Statistics (journal). Editor Compensation.
Microsoft Research New England (research laboratory). Consultant.
Precision Health Economics (for profit). Consultant.
HealthEngine (for profit), Co-Founder. Equity position only.
Maxwell Health, OK-CoPay, Advisory Boards. Equity position only.
GI Roundable. Speaking Fee
MAHIP Speaking Fee
Institute of Medicine (IOM), Panel on Graduate Medical Education, Member of Panel. Unpaid.
Chandra, Amitabh, Amy Finkelstein, Adam Sacarny, and Chad Syverson. 2016. "Health Care Exceptionalism? Performance and Allocation in the US Health Care Sector." American Economic Review, 106 (8): 2110-44. DOI: 10.1257/aer.20151080 citation courtesy of