No abstract

Many industries have become increasingly concentrated through mergers and acquisitions, which in health care may have important consequences for spending and outcomes. Using a rich panel of Medicare claims data for nearly one million dialysis patients, we advance the literature on the effects of mergers and acquisitions by studying the precise ways providers change their behavior following an acquisition. We base our empirical analysis on more than 1,200 acquisitions of independent dialysis facilities by large chains over a 12-year period and find that chains transfer several prominent strategies to the facilities they acquire. Most notably, acquired facilities converge to the behavior of their new parent companies by increasing patients’ doses of highly reimbursed drugs, replacing high-skill nurses with less-skilled technicians, and waitlisting fewer patients for kidney transplants. We then show that patients fare worse as a result of these changes: outcomes such as hospitalizations and mortality deteriorate, with our long panel allowing us to identify these effects from within-facility or within-patient variation around the acquisitions. Because overall Medicare spending increases at acquired facilities, mostly as a result of higher drug reimbursements, this decline in quality corresponds to a decline in value for payers. We conclude the article by considering the channels through which acquisitions produce such large changes in provider behavior and outcomes, finding that increased market power cannot explain the decline in quality. Rather, the adoption of the acquiring firm’s strategies and practices drives our main results, with greater economies of scale for drug purchasing responsible for more than half of the change in profits following an acquisition.

We show that healthcare providers face a tradeoff between increasing the number of patients they treat and improving their quality of care, with those providers facing the strongest incentives to treat more patients delivering the lowest quality of care. To measure the magnitude of this quality-quantity tradeoff, we estimate a model of dialysis provision that explicitly incorporates a center's endogenous choice of treatment quality and allows for unobserved differences in productivity across centers. We find that centers may treat 1 percent more patients by allowing their expected infection rate to increase by 0.8 percentage points (6 percent), holding inputs and productivity fixed. Our approach provides unbiased estimates of productivity, whereas traditional methods misattribute lower-quality care to greater productivity. We also find (i) extensive quality-adjusted productivity dispersion across providers, (ii) better outcomes among non-profit entities, and (iii) comparatively little effect from competition. JEL: D24, I1, L2

How much economic value did the diffusion of broadband create? We provide benchmark estimates for 1999 to 2006. We observe $39 billion of total revenue in Internet access in 2006, with broadband accounting for $28 billion of this total. Depending on the estimate, households generated $20 to $22 billion of the broadband revenue. Approximately $8.3 to $10.6 billion was additional revenue created between 1999 and 2006. That replacement is associated with $4.8 to $6.7 billion in consumer surplus, which is not measured via Gross Domestic Product (GDP). An Internet-access Consumer Price Index (CPI) would have to decline by 1.6% to 2.2% per year for it to reflect the creation of value. These estimates both differ substantially from those typically quoted in Washington policy discussions, and they shed light on several broadband policy issues, such as why relying on private investment worked to diffuse broadband in many US urban locations at the start of the millennium. Here, we calculate a benchmark for the two conventional approaches to measuring economic gains. We render these numerical estimates in the spirit of Johnson, who states, "That, sir, is the good of counting. It brings every thing to a certainty, which before floated in the mind indefinitely." 4 In other words, we provide numerical estimates where before there had been none. This establishes the plausible range of the size of the measured economic gains from the upgrade to broadband.

Key Points Question What is the association between private equity (PE) acquisition of short-term acute care hospitals and measures of comorbidity, mortality, readmission, length of stay, and spending among Medicare beneficiaries admitted to the hospital with 1 of 5 acute medical conditions? Findings In this cross-sectional study of more than 21 million Medicare beneficiaries with 5 different acute medical conditions who were hospitalized at short-term acute care hospitals, PE acquisition was associated with significantly lower inpatient mortality (−1.1 percentage points) and lower 30-day mortality (−1.4 percentage points) among patients admitted with acute myocardial infarction. However, PE acquisition was not associated with significant differences in other dimensions of quality and spending or with differences across other medical conditions. Meaning The study’s findings suggest that PE acquisition has mixed consequences for patient-level outcomes overall but is associated with moderate and consistent improvement in mortality among Medicare beneficiaries hospitalized with acute myocardial infarction.