Faculty Profile

We (Wedig and Lu) have made significant progress on a companion paper to MALPRACTICE LAWS AND INCENTIVES TO SHIELD ASSETS: EVIDENCE FROM NURSING HOMES. This paper studies the effects of torts law on quality inputs and production in nursing homes. There is a classic liability literature that predicts that product/service quality will fall in some cases where liability is reduced. The major contribution of this paper is considering how organizational economics affects the quality-liability relation. For example, torts liability affects organizational form and, in turn, different organization forms a) respond to liability reductions in different degrees; and b) produce quality with differing levels of efficiency. As a result, it is possible that reductions in tort liability may actually promote quality by promoting the more efficient organizational form and vice versa. A key part of the empirical methodology is correcting for selection bias (organizational form is endogenous) in a panel data set up. Given the possibility that the selection error is serially correlated, a simple Heckman correction is not sufficient and other corrections are needed. We employ techniques suggested in (2) publications by Wooldridge and obtain bootstrapped standard errors. To date we have established that, tort reform, causes nursing homes to reduce key inputs (such as registered nursing hours) and, equally important, that large-chain affiliated nursing homes make greater reductions in inputs than non-affiliated homes. We also establish, consistent with our earlier work, that tort reform encourages the entry of large chains into reform states. Our remaining work on this paper will focus on the effects of changing inputs on quality and a full simulation of the effects of tort reform on quality.

I develop a criterion for sufficient free cash flow (FCF) in "sustainable" commercial nonprofit organizations. Calibration of the measure requires specific adjustments for tax-exempt financing. The measure is expected to vary less than comparable measures in otherwise identical for-profit organizations. Measurements and tests of hypotheses are performed in a large sample of hospitals.

We examine the determinants of specialization among hospitals belonging to a common chain. We posit two effects that may influence specialization among chain members: a) a cannibalization effect; and b) a travel cost effect. We investigate the role of geography in these effect.

The strategic interaction between public (e.g., Medicare) and private insurers is poorly understood, especially within the physician services market. In this paper we propose and test a model of this interaction.

I examine the relationship between hospital prices, physician services prices and vertical integration between physicians and hospitals.