No abstract

A regulatory agency enforcing compliance in a declining industry might recognize that certain plants would close rather than comply, and that these closings would impose large costs on the local community. EPA enforcement activity in the U.S. steel industry is examined for evidence of this result. A three-equation system linking EPA enforcement decisions, company plant-closing decisions, and company compliance decisions is estimated. The results indicate that the EPA directed fewer enforcement actions toward plants with a high predicted probability of closing and plants that were major employers in their community; also, plants predicted to face relatively heavy enforcement were more likely to close.

This study explores the association between cost inefficiency and health outcomes in a national sample of acute-care hospitals in the US over the period 1999-2001, with health outcomes being measured by both mortality and complications rates. The empirical analysis examines health outcomes as a function of cost inefficiency and other determinants of outcomes, using stochastic frontier analysis to obtain hospital cost inefficiency scores. The results showed no systematic pattern of association between cost inefficiency and hospital health outcomes; the basic results were unchanged regardless of whether cost inefficiency was measured with or without using instrumental variables. The analysis also indicated, however, that the association between cost inefficiency and health outcomes may vary substantially across geographical regions. The study highlights the importance of distinguishing between 'good' costs that reflect the efficient use of resources and 'bad' costs that stem from waste and other forms of inefficiency. In particular, the study's results suggest that hospital programs focused on reducing cost inefficiency are unlikely to be associated with worsened hospital-level mortality or complications rates, while, on the other hand, across-the-board reductions in cost could well have adverse consequences on health outcomes by reducing efficient as well as inefficient costs.

This study examines the relationship between health outcomes and cost inefficiency in Florida hospitals over the period 1999-2001, with health outcomes measured by risk-adjusted in-hospital mortality rates. Previous research has come to conflicting conclusions regarding the relationship between costs and health outcomes. We hypothesize that these seemingly conflicting findings are due to the fact that total cost has two components--cost that reflects the best use of resources under current circumstances and cost associated with waste or inefficiency. By isolating costs due to inefficiency, we can examine directly their relationship, if any, to hospital mortality rates, and begin to assess whether policies that create incentives for hospitals to increase efficiency have adverse effects on health outcomes. We regress an in-hospital mortality index for each hospital on a measure of the hospital's cost inefficiency, obtained from a stochastic cost frontier estimation, as well as on predicted mortality and a set of variables linked to mortality performance. Our results indicate a positive and significant relationship between a hospital's mortality performance and its inefficiency: on average, a one percentage point reduction in cost inefficiency would be associated with one fewer in-hospital death per 10,000 discharges, holding patient risk and other factors constant.