Organizational Economics and Physician Practices

Posted on March 31, 2022 by Editor-in-Chief

N.B.E.R.

By James B. Rebitzer & Mark E. Votruba

Economists seeking to improve the efficiency of health care delivery frequently emphasize two issues: the fragmented structure of physician practices and poorly designed physician incentives. This decade old paper analyzes these issues from the perspective of organizational economics.

We begin with a brief overview of the structure of physician practices and observe that the long anticipated triumph of integrated care delivery has largely gone unrealized. We then analyze the special problems that fragmentation poses for the design of physician incentives. Organizational economics suggests some promising incentive strategies for this setting, but implementing these strategies is complicated by norms of autonomy in the medical profession and by other factors that inhibit effective integration between hospitals and physicians. Compounding these problems are patterns of medical specialization that complicate coordination among physicians.

We conclude by considering the policy implications of our analysis – paying particular attention to proposed Accountable Care Organizations.

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READ HERE: https://www.nber.org/papers/w17535

ASSESSMENT: What has changed this past decade; if anything? Your thoughts are appreciated.

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The College Degree [Mortality] Advantage

Posted on March 26, 2022 by Editor-in-Chief

By the NBER

Working Paper 29328), Anne Case and Angus Deaton

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The Persistent Mortality Advantage of a College Degree
In 2019, Americans with a four-year college degree had six years greater life expectancy at age 25 than those without a degree. These educational differences in mortality have been growing in recent decades and are apparent across demographic groups. In Mortality Rates by College Degree before and during COVID-19 (NBER Working Paper 29328), Anne Case and Angus Deaton explore the evolution of these differences during the pandemic.

If every American faced an equal threat of infection and death from COVID-19, then the mortality gap between more and less educated individuals would have narrowed during the pandemic. However, the risks from COVID-19 were plausibly greater for those without a college degree for a variety of reasons. For example, people without college degrees disproportionately work in occupations where working from home to avoid infection is not feasible. They are more likely to use public transportation and to live in crowded housing arrangements, heightening their risk of exposure. Conditional on infection, less educated individuals may experience worse outcomes due to higher average rates of pre-existing conditions and poorer access to health care.

Using provisional mortality data from the National Center for Health Statistics, the researchers determine that a college degree was protective against mortality during the calendar year 2020, which encompassed the first nine months of the pandemic. They express the mortality advantage of a college degree using the ratio of the mortality rate for those without a four-year college degree to the rate for those with a degree. The researchers calculate these ratios for 60 different demographic groups, identified by two genders, five age groups, and six racial/ethnic categories (Hispanic, non-Hispanic White, non-Hispanic Black, Asian, American Indian/Alaskan Native, and those who report two or more races).

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The Bulletin on Health summarizes selected recent NBER Working Papers. It is distributed digitally to economists and other interested persons for informational and discussion purposes. The Bulletin is not copyrighted and may be reproduced freely with attribution of source.

To sign up to receive new Bulletin on Health issues by email, please visit: www.nber.org/prefs/bh.pl

Prior to creation of the Bulletin on Health, the NBER published the Bulletin on Aging and Health.

Working Papers produced as part of the NBER’s research program are distributed to encourage discussion and suggestions of preliminary work. Neither Working Papers nor issues of the Bulletin on Health are reviewed by the Board of Directors of the NBER.

The Bulletin on Health is edited by Robin McKnight   Across all demographic groups, the ratios were all above one in 2020, reflecting higher mortality rates for those without college degrees. The ratios were highest for younger age groups: in the 25 to 39 age group, mortality rates for those without college degrees were as much as seven times the rates for those with college degrees. The researchers argue that the association between education and mortality is concentrated among preventable deaths, which are more prevalent causes of death among younger adults. In addition, older Americans are more likely to be retired, so additional risks that less educated workers faced due to occupational differences were less relevant for older age groups.

The overall finding that those without college degrees were at greater risk of death during the pandemic may not seem surprising, given their differential risks of infection, higher rates of pre-existing conditions, and worse access to care. A more unexpected finding is that these differences in mortality risk, as reflected in the mortality ratio, were very similar to the differences in mortality risk in the year prior to the pandemic. The figure, which plots the ratios for each demographic group in 2019 and in 2020, shows that the mortality advantage of a college degree was little changed during the pandemic relative to the prior year.

The figure highlights a few exceptions to this pattern. For Hispanic women aged 25 to 64 and for non-Hispanic American Indian/Alaskan Native women aged 25 to 39, the mortality advantage of a college degree was substantially higher in 2020 than in 2019. But for most demographic groups, the mortality ratios during the pandemic were strikingly similar to those before the pandemic. In fact, for over half of the demographic groups, the ratio was slightly lower in 2020 than in 2019.

The results suggest that the mortality advantage of a college degree during the pandemic was a continuation of pre-existing health differentials between those with and without college degrees. “The mystery,” the researchers conclude, “is not why the [college degree] was protective during the pandemic, but why the effect was proportionately as large before the pandemic.”

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WEALTH ACCUMULATION: Temptation and Incentives

Posted on March 19, 2022 by Editor-in-Chief

A WORKING WHITE PAPER

Orazio Attanasio

Agnes Kovacs

Patrick Moran

We propose a rich model of household behavior to study the effect of two important policies: mortgage interest tax deduction and mandatory mortgage amortization. These policies have attracted some controversy, first because they are conceived to increase overall saving, an objective that the literature does not agree they can achieve, and second because they incentivize illiquid savings and may thus increase the share of ‘wealthy hand-to-mouth’ households.

We build a life-cycle model where housing may act as a commitment device to counteract present biases arising from temptation. We show that the model matches several empirical facts, including the large share of wealthy hand-to-mouth households. We evaluate the effect of the two policies and find that they increase wealth accumulation by 7 and 10% respectively.

Our results demonstrate that these policies not only induce portfolio re-balancing, as emphasized by the previous literature, but also increase savings by making commitment more accessible.

WHITE PAPER: https://www.nber.org/system/files/working_papers/w28938/w28938.pdf

ASSESSMENT: Your thoughts and comments are appreciated.

THANK YOU

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On Higher Prescription Drug Cost-Sharing and Mortality?

Posted on July 7, 2021 by Editor-in-Chief

Raises Mortality among Medicare PART D Beneficiaries

QUERY: What are the health consequences when patients reduce their use of prescribed medications in response to higher out-of-pocket costs?

w28439.jpg

In The Health Costs of Cost-Sharing (NBER Working Paper 28439), researchers Amitabh Chandra, Evan Flack and Ziad Obermeyer use the distinctive out-of-pocket cost-sharing features of Medicare Part D to demonstrate that such reductions can increase mortality.

ASSESSMENT: Your thoughts are appreciated.

THANK YOU

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The Economic Value and Pricing of “Personalized and Precision” Medicine

Posted on June 25, 2021 by Editor-in-Chief

PRECISION MEDICINE

By Tomas J. Philipson

DEFINITION: Personalized medicine, also referred to as precision medicine, is a medical model that separates people into different groups—with medical decisions, practices, interventions and/or products being tailored to the individual patient based on their predicted response or risk of disease

CITE: https://www.amazon.com/Dictionary-Health-Insurance-Managed-Care/dp/0826149944/ref=sr_1_4?ie=UTF8&s=books&qid=1275315485&sr=1-4

We discuss the economic value of personalized medicine and the optimal pricing of the combination products involved. We build on previous work of Egan and Philipson (2015) who stress a link between rational adherence in health care and the value of personalized medicine. Personalized medicine converts experience goods to search goods by speeding up the learning process relative to trial and error. This explains the emergence of personalized medicine in cancer care as well as the timing of this emergence. It also predicts greater innovation-and merger incentives from Disneyland style two-part pricing of the combination products.

Personalized Medicine - Personal Medicine - Medicine ...

READ: https://www.nber.org/system/files/chapters/c13997/c13997.pdf

Your thoughts are appreciated.

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Selected NBER Papers of Note for MDs and FAs

Posted on January 12, 2013 by Editor-in-Chief

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National Bureau of Economic Research

www.NBER.org

The 2012 No. 3 Bulletin includes the articles below:

1)  The Value of Planning Prompts
by Katherine Milkman, John Beshears, James Choi, David Laibson, and Brigitte Madrian
http://www.nber.org/aginghealth/2012no3/w17994.html

2)  The Effect of the Earned Income Tax Credit on Infant Health
by Hilary Hoynes, Douglas Miller, and David Simon
http://www.nber.org/aginghealth/2012no3/w18206.html

3)  Can Health Explain Differences in Employment of Older Men Across Countries?
by Kevin Milligan and David Wise
http://www.nber.org/aginghealth/2012no3/w18229.html

Assessment

Abstracts of Selected Recent NBER Working Papers:
http://www.nber.org/aginghealth/2012no3/WorkingPaperSummaries.html

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The NBER Bulletin on Aging and Health

Posted on September 23, 2012 by Editor-in-Chief

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The National Bureau of Economic Research — 2012 No. 2

The 2012 No. 2 Bulletin includes the articles below:

1)  Can Low-Cost Interventions Affect Retirement Saving Behavior?

by Gopi Shah Goda, Colleen Flaherty Manchester, and Aaron Sojourner –  #17927
by James Choi, Emily Haisley, Jennifer Kurkoski, and Cade Massey – #17843

http://www.nber.org/aginghealth/2012no2/w17927.html

2)  Labor Market Effects of the Massachusetts Health Insurance Reform

by Jonathan Kolstad and Amanda Kowalski

http://www.nber.org/aginghealth/2012no2/w17933.html

3)  Can Germany’s Riester Pensions Fill the Pension Gap?

by Axel Boersch-Supan, Michela Coppola, and Anette Reil-Held

http://www.nber.org/aginghealth/2012no2/w18014.html

4)  Retirement Before the Social Security Entitlement Age

by Kevin Milligan

http://www.nber.org/aginghealth/2012no2/w18051.html

5)  Are Consumers Forward-Looking in Responding to Health Care Prices?

by Aviva Aron-Dine, Liran Einav, Amy Finklestein, and Mark Cullen

http://www.nber.org/aginghealth/2012no2/w17802.html

NBER Profile:  Patricia Danzon

http://www.nber.org/aginghealth/2012no2/danzon.html

NBER Profile:  Doug Staiger

http://www.nber.org/aginghealth/2012no2/staiger.html

Conclusion

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Spillovers, Complementarities and Specialization in the Hospital Industry

Posted on April 26, 2011 by Editor-in-Chief

Broadening Focus

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NBER Working Paper No. 16937
Issued in April 2011

The long-standing argument that focused operations out-perform others stands in stark contrast to claims about the benefits of broader operational scope and is addressed by Jonathan R. Clark, Robert Huckman in this working paper

Specialize Expertise

The performance benefits of focus are typically attributed to reduced complexity, lower uncertainty, and the development of specialized expertise, while the benefits of greater breadth are linked to the economies of scope achieved by sharing common resources, such as advertising or production capacity, across activities. Within the literature on corporate strategy, this tension between focus and breadth is reconciled by the concept of related diversification (i.e., a firm with multiple operating units, each specializing in distinct but related activities). They consider whether there are similar benefits to related diversification within an operating unit and examine the mechanism that generates these benefits.

Cardio-Vascular Care Context

Using the empirical context of cardiovascular care within hospitals, the authors first examine the relationship between a hospital’s level of specialization in cardiovascular care and the quality of its clinical performance on cardiovascular patients. They find that, on average, focus has a positive effect on quality performance. They then distinguish between positive spillovers and complementarities to examine: (1) the extent to which a hospital’s specialization in areas related to cardiovascular care directly impacts performance on cardiovascular patients (positive spillovers) and (2) whether the marginal benefit of a hospital’s focus in cardiovascular care depends on the degree to which the hospital “co-specializes” in related areas (complementarities).

Assessment

In this setting, they find evidence of such complementarities in hospital specialization.

Link: https://hq.ssrn.com/login/pubSignInJoin.cfm?nber_id=w16937

Conclusion

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