Hospital Financial Health and Clinical Choices: Evidence From the Financial Crisis by Manuel Adelino, Katharina Lewellen, W. Ben McCartney :: SSRN

Financial constraints can cause firms to reduce product quality when quality is difficult to observe. We test this hypothesis in the context of medical choices at hospitals. Using heart attacks and child deliveries, we ask whether hospitals shift towards more profitable treatment options after a financial shock — the 2008 financial crisis — and whether the shock worsens patient outcomes. The crisis caused an unprecedented shock to hospitals’ financial health and was followed by a significant and sudden decline in capital investments, yet we find no overall effects on treatment choices and weak effects on patient outcomes. The results are similar for for-profits and nonprofits, and somewhat stronger for hospitals with more tightly integrated physicians.

via Hospital Financial Health and Clinical Choices: Evidence From the Financial Crisis by Manuel Adelino, Katharina Lewellen, W. Ben McCartney :: SSRN

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