Three essays on health economics theory and evidence

The first essay studies how the change in payment mechanism shifts hospital investment from quality-enhancing technologies to cost-saving technologies. A by-product of this change is more potential for for-profit hospitals to capture a larger share of the market. With a retrospective average cost-based program, the not-for-profit hospital invests only in the qualityenhancing technology. The for-profit hospital has no incentive to invest in either technology. When hospitals are reimbursed prospectively, however, the not-for-profit hospital invests in both the quality improving and the cost saving technologies, as does the for-profit hospital, although at lesser amounts, and market shares are more equal. The results of these analysis help explain the increasing market share of for-profit hospitals as prospective payment has become the norm. The second essay presents an empirical methodology for examining financial well-being and body weight. The central hypothesis of this study is that financial assets, a form of savings and debts may or may not induce weight gain. Then I estimate which exogenous variables in financial assets or debts cause weight loss. Using data from the Panel Study of Income Dynamics (PSID) and supplemental, I identify the causal relationship between various measures of financial well-being and weight. Home owners are noted to have higher body mass index, although the value of home is negatively associated with weight for both gender cohorts. Though this individual fixed effects specification effectively controls for time-invariant unobservable personal characteristics, it does not eliminate the endogeneity of key covariates. I intend to use instrumental variables techniques to address this problem. In this light, we find the negative coefficient on savings and home value, and positive coefficient on other debt for both men and women. The final essay provides an empirical extension of the first essay. A testable hypothesis of the first essay is whether or not a prospective payment system enables for-profit hospitals to expand market share. The most important result in the context of this analysis is that the higher portion of patients covered by prospective payment system is associated with an increase in market share of the for-profit hospitals, which supports the theoretical explanation of the first essay