Essays in Health Care Economics

Nicholas Benson

Data is provided by the student.

Abstract

This dissertation comprises two essays. The innovation in the first essay is investigating how spine surgeons respond to reimbursement changes. Spinal fusion is the highest US operating room expense and the performed fusion procedure depends on surgeon preference. Substitutable procedures (one-stage posterior, or 1SF, and two-stage fusions, or 2SF) are studied using 2010-2014 national claims data. Results from a multinomial logit model reveal a significant rise in the volume of 2SF, the procedure with the highest physician fee, following a 13.9% reduction in 1SF fees. Risk ratio analysis indicates that patients were 5.8% more likely to receive the costlier 2SF after the policy change. The -0.512 estimated cross-price elasticity of supply suggests that the procedures are substitutes. This contradicts the standard prediction from the target-income hypothesis. The second essay on rent seeking demonstrates how, at the state-level, Certificate of Need programs (CONP) and the strength of the Corporate Practice of Medicine doctrine (CPMD) could enrich incumbent hospitals by limiting competition. Private practice spine surgeons partner with commercial insurers to move common procedures, e.g. spinal decompressions or anterior cervical fusions (ACDFs), from hospital inpatient to ambulatory surgery centers (ASCs) reducing procedure cost by as much as 65%. This paper used 2009-2015 claims data on 1,018,171 procedures to determine if the CONP or the CPMD strength influence the choice of higher vs lower cost surgical settings. CONPs in 24 states are a barrier to opening ASCs. The common law, CPMD, prevents corporations from practicing medicine by employing physicians. Hypotheses tested are that CONPs and a weak CPMD lead to fewer procedures in lower cost settings. Results confirm that in states with weak CPMDs, patients are 59% less likely to have an ACDF in an ASC and patients in states with a CONP are 40% less likely to have an ACDF in an ASC.