Essays on the Economics of Health Care, Productivity, and Market Structure

Abstract

The first essay studies how private-equity driven consolidation in health care affects real outcomes. By matching insurance claims data with information on private equity acquisitions of dental clinics, we show that private equity ownership increases both clinic revenue from reimbursements and the volume of procedures clinicians perform, and that these increases overwhelmingly come from the extensive margin. Further, we show heterogeneity in these effects across the types of procedures clinicians perform, with particular effect on X-rays and other diagnostic procedures. The second essay analyzes the relationship between the HITECH Act and very early-stage venture capital activity in the health care information technology industry. We first document increases in entrepreneurial capital in both general health care IT companies and in specifically EHR-related companies. Second, we show that the increase in the proportion of seed-stage funding within health care IT in the years following the HITECH Act is likely not attributable to the Act itself, as IT companies unrelated to health care, as well as health care IT in Europe, both experienced similar shifts in the distribution of venture capital financing. The third essay studies the empirical relationship between the rise of health care information technology and health system consolidation. Motivated by a theoretical model of concentration and technology adoption, we demonstrate that hospital mergers cause significant acceleration in investment in IT capabilities at acquired hospitals. We show that this effect is driven by acquisitions of low-capability hospitals by high-capability systems. Finally, we provide suggestive evidence that a hospital's relative level of IT adoption is predictive of future acquisition activity.