How Do Health Care Providers Deploy Public Funds?

Pilot Project

How Do Health Care Providers Deploy Public Funds?

An important concern in the ongoing policy debate over providing universal single payer health coverage ("Medicare for all") is the potential detrimental impact on health care provider finances. A key input into policy design is to know the marginal value of taxpayer dollars i.e. what would hospitals and other providers do when they lose a dollar of revenue. To shed light on this question, we propose to learn from a related setting -- the recent public insurance expansions authorized by the Affordable Care Act (ACA). It is now well established that the Medicaid and exchange expansions led to a substantial decline in uncompensated care burden for hospitals and other providers (Blavin, 2016; Dranove et al., 2016; Nikpay, 2016). Recent empirical work (Duggan et al., 2019; Dunn et al., 2019) has estimated this led to an increase in revenue on the order of 10-15% for the average hospital. It is unclear whether and how providers have deployed this infusion of taxpayer funds. The goal of this study is to quantify the deployment of the incremental funds towards various factor inputs into the production of care (labor, capital equipment and new services), other activities unrelated to care delivery (marketing, new business alliances) and increasing reserves. Our empirical approach will exploit variation in the incidence of the ACA expansion across markets, and leverage several rich data sources, including confidential Census economic and survey data, advertising spend data from A C Nielsen, and survey data from the American Hospital Association (AHA) among others.