Higher health care spending, better outcomes–vacationers seeking emergency room treatment examined

MIT Sloan Assoc. Prof. Joe Doyle

As the debate about health care costs swirls, I’ve published an article that challenges the common view that higher healthcare spending is not correlated with better health outcomes. To the contrary, I found that tourists who become ill and receive emergency care at “high-spending” hospitals have significantly lower mortality rates compared to tourists who end up in “lower-spending” hospitals.

Because hospitals in general tend to spend more on sicker patients, I knew how difficult it is to estimate returns to healthcare spending. My goal was to compare apples to apples.  It’s not possible to conduct a randomized experiment where some patients go to a high-spending hospital system and others are sent to a low-spending one.  Since most people don’t choose their vacation destinations based on the budgets of local hospitals, tourists come close to mimicking this type of random assignment:  some are exposed to high-spending hospital systems while others are exposed to low-spending ones.

I was able to compare patients in Florida with similar health conditions (heart attacks) and who were visiting similar tourist destinations. What varied widely was the level of spending by the hospitals where they sought treatment. The result? If you have a heart attack while on vacation, your chances for a positive outcome are 20% better if you seek treatment in a hospital that tends to spend more.

The previous literature has been cited in support of limits on Medicare growth with little or no impact on health.  My study adds some caution to this conclusion.  My view is that some forms of healthcare have high returns and other forms are wasteful:  the key challenge is figuring out which is which.

See the full paper and article in the American Economic Journal: Applied Economics 

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Joseph Doyle is the Alfred Henry (1929) and Jean Morrison Hayes Career Development Professor; Associate Professor of Applied Economics

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