Uncovering Waste in U.S. Healthcare

46 Pages Posted: 30 Mar 2015

See all articles by Joseph J. Doyle

Joseph J. Doyle

Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA); National Bureau of Economic Research (NBER)

John Graves

Vanderbilt University

Jonathan Gruber

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: March 2015

Abstract

There is widespread agreement that the US healthcare system wastes as much as 5% of GDP, yet little consensus on what care is actually unproductive. This partly arises because of the endogeneity of patient choice of treatment location. This paper uses the effective random assignment of patients to ambulance companies to generate comparisons across similar patients treated at different hospitals. We find that assignment to hospitals whose patients receive large amounts of care over the three months following a health emergency do not have meaningfully better survival outcomes compared to hospitals whose patients receive less. Outcomes are related to different types of treatment intensity, however: patients assigned to hospitals with high levels of inpatient spending are more likely to survive to one year, while those assigned to hospitals with high levels of outpatient spending are less likely to do so. This adverse effect of outpatient spending is predominately driven by spending at skilled nursing facilities (SNF) following hospitalization. These results offer a new type of quality measure for hospitals based on utilization of SNFs. We find that patients quasi-randomized to hospitals with high rates of SNF discharge have poorer outcomes, as well as higher downstream spending once conditioning on initial hospital spending.

Suggested Citation

Doyle, Joseph John and Graves, John and Gruber, Jonathan, Uncovering Waste in U.S. Healthcare (March 2015). NBER Working Paper No. w21050, Available at SSRN: https://ssrn.com/abstract=2586903

Joseph John Doyle (Contact Author)

Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA) ( email )

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John Graves

Vanderbilt University ( email )

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Jonathan Gruber

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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