The effects of institutional change on geographic variation and health services use in the USA

This paper examines the impact of institutional change on patient care. Using panel data on obstetric deliveries from the state of California in the United States between 1983 and 2001, it develops and tests hypotheses predicting impacts of three features of institutional change—managed care insurance, changing professional controls and public attention to cost-control practices—on cesarean use and geographic variation in cesarean deliveries. It finds that managed care insurance promotes the diffusion of cost-effective patient care practices, reducing cesarean use and increasing variation. I found that over time, managed care patients experience continued lower use and reduced geographic variation as new practices become established. The combined effects of changing professional controls—the growing importance of clinical guidelines—and public attention to cost-control practices also diffuses cost-effective practices, increasing variation and decreasing cesarean use. Cesarean use increases and geographic variation declines in a period of managed care retreat in the late 1990s. The analysis extends prior research by documenting the impact of institutional change on health services use and variation and by suggesting that geographic variation is caused, in part, by the diffusion of new patient care practices.