Uncovering waste in US healthcare

There is widespread agreement that the US healthcare system wastes as much as 5% of GDP, yet much less agreement on the source of the waste. This paper uses the effectively random assignment of patients to ambulance companies to generate comparisons across similar patients treated at different hospitals. We find that assignment to hospitals whose patients receive large amounts of care over the three months following a health emergency have only modestly better survival outcomes compared to hospitals whose patients receive less. Outcomes are related to different forms of spending. Patients assigned to hospitals with high levels of inpatient spending are more likely to survive to one year, while high levels of outpatient spending result in lower survival. In particular, we discovered that downstream spending at skilled nursing facilities (SNF) is a strong predictor of mortality. Our results highlight SNF admissions as a quality measure to complement the commonly used measure of hospital readmissions and suggest that in the search for waste in the US healthcare, post-acute SNF care is a prime candidate.