Work in Progress  – Physician Labor Markets and Specialization:

Market Size and Trade in Medical Services (with Jonathan Dingel, Josh Gottlieb, and Pauline Mourot)

We use microdata on 230 million Medicare claims to study the pattern of specialization and trade in medical services within the United States. Trade – care provided by physicians to patients who reside in a different hospital referral region – accounts for almost 30% of patient care in the average region. Consistent with economies of scale in healthcare production, less populous regions produce less medical care per capita. Larger markets tend to be net exporters of medical services, especially less common procedures. Despite declining with bilateral distance faster than trade in manufactures, trade in medical services substantially equalizes patient care. Due to trade, consumption varies with market size half as much as production does.

Firms, Markets, and the Division of Labor: The Case of Physicians (with Pauline Mourot)

Why and how do physicians co-locate to provide care? We establish several novel facts regarding this question. First, the number of healthcare establishments grows with an elasticity near one with market size, so that a doubling of population results in twice as many healthcare establishments. Notably, the average size of healthcare establishments does not increase measurably with the market size. These results suggest that coordination costs substantially constrain establishment size. We also show that the composition of establishments varies substantially with market size, even though they remain the same size. As market size grows, physicians co-locate more with same-specialty colleagues, individually produce a narrower set of services, and collectively produce a larger set and volume of services. The results suggest that same-specialty colleagues become more valuable as the market size grows due to an increasingly fine division of labor, allowing for production efficiencies.

Specialization and the Extent of General Knowledge: Evidence from Oncologists (with Pauline Mourot)

Becker and Murphy (1992) theorized that the growth of general knowledge leads to greater specialization. We provide, to our knowledge, the first direct empirical test of this prediction in the context of oncologists or doctors who treat cancer patients with drugs. Oncology has experienced rapid growth in the number of available drugs. We indirectly measure the relative size of the knowledge base of individuals and the field as the number of unique drugs in active use. We then test how individual physicians’ knowledge base responds to growth in general knowledge. Then we test if physicians in subfields with greater growth in general knowledge subsequently become more specialized. We also evaluate if the response to knowledge growth is mediated by the size of the market and firm, leading to greater spatial disparities in access to specialized care. Finally, we assess the welfare effects of potentially increased efficiency and but worsened access from increased specialization. Data funding permitting, we will also test if specialization results in better health outcomes. The results have implications for healthcare quality, rural health policy, and labor markets in knowledge-intensive fields.

Work in Progress – Theory and Empirics in the Economics of Medical Complexity:

Improving Risk Adjustment For Multimorbid Medicare Patients

Risk adjustment is used to adjust insurance premium payments for individuals’ health characteristics. However, current risk-adjustment models consistently underestimate costs for multi-morbid patients. My evidence suggests that the effect of a health condition on costs increases with a patient’s comorbidity burden. I develop risk adjustment models that specifically incorporate the heterogeneous effects of health conditions. Second, I evaluate if these effect models meaningfully improve upon the statistical performance of current models for reasonable losses of model parsimony. Finally, I evaluate whether these effect models reduce incentives for selective patient enrollment. I find that the non-parametric models improve statistical performance the most, but targeted parametric models achieve similar performance with vastly more parsimony.

The Art of Medicine as Economics: Modeling Clinical Tradeoffs in the Production of Health

Standard economic models assume that monetary costs are the primary constraint to the use of medical care. However, clinical medicine abounds with situations where the use of effective medical treatments is not constrained by monetary costs but by the negative side effects of treatments, or “health costs”. Navigating these trade-offs is referred to clinically as “the art of medicine.” I model these trade-offs by making a simple but substantive change to standard economic models of healthcare consumption. Medical treatments have a health cost. Treatment improves health in one dimension but harms it in another, constraining healthcare use. Patients whose medical care is constrained by health costs are unresponsive to monetary price changes. I plan test empirically for the existence of health cost constraints in the use of a cheap and effective medication (metformin) in healthcare claims and lab data. The model and results aim to provide further predictions about situations in which price will be an effective policy lever, raise questions about the empirical feasibility of value-based pricing, and provides economists with a framework for thinking about clinical tradeoffs, a central driver of patterns of healthcare consumption.

Miscellaneous Projects:

Best Subset Selection: Some Recommendations for Practitioners