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Long-Term Care Hospitals: A Case Study in Waste

Author

Listed:
  • Liran Einav

    (Stanford University and NBER)

  • Amy Finkelstein

    (MIT and NBER)

  • Neale Mahoney

    (Stanford University and NBER)

Abstract

There is substantial waste in U.S. healthcare but little consensus on how to combat it. We identify one source of waste: long-term care hospitals (LTCHs). Using the entry of LTCHs into hospital markets in an event study design, we find that most LTCH patients would have counterfactually received care at Skilled Nursing Facilities—facilities that provide medically similar care but are paid significantly less—and that substitution to LTCHs leaves patients unaffected or worse off on all dimensions we can objectively measure. Our results imply Medicare could save about $4.6 billion per year by not allowing discharge to LTCHs.

Suggested Citation

  • Liran Einav & Amy Finkelstein & Neale Mahoney, 2023. "Long-Term Care Hospitals: A Case Study in Waste," The Review of Economics and Statistics, MIT Press, vol. 105(4), pages 745-765, July.
    • Handle: RePEc:tpr:restat:v:105:y:2023:i:4:p:745-765
    DOI: 10.1162/rest_a_01092
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    Cited by:

    1. Toikka, Max & Saxell, Tanja & Siikanen, Markku, 2026. "Labor Market Effects of Private Provider Entry in Social and Health Services," Working Papers 184, VATT Institute for Economic Research.
    2. Amitabh Chandra & Carrie H. Colla & Jonathan S. Skinner, 2023. "Productivity Variation and Input Misallocation: Evidence from Hospitals," NBER Working Papers 31569, National Bureau of Economic Research, Inc.
    3. Corneliu Bolbocean & Michael Shevell, 2020. "The impact of high intensity care around birth on long-term neurodevelopmental outcomes," Health Economics Review, Springer, vol. 10(1), pages 1-12, December.
    4. Stephen Coussens & Jann Spiess, 2021. "Improving Inference from Simple Instruments through Compliance Estimation," Papers 2108.03726, arXiv.org.
    5. Chen, Alice J. & Munnich, Elizabeth L. & Parente, Stephen T. & Richards, Michael R., 2023. "Provider turf wars and Medicare payment rules," Journal of Public Economics, Elsevier, vol. 218(C).
    6. Liran Einav & Amy Finkelstein & Neale Mahoney, 2018. "Provider Incentives and Healthcare Costs: Evidence From Long‐Term Care Hospitals," Econometrica, Econometric Society, vol. 86(6), pages 2161-2219, November.

    More about this item

    JEL classification:

    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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