Health System
Margin or Mission? Understanding the Relationship Between Multilevel Functional Subgroups and Pricing
Daniel Albert & John Eklund
Organization Science, forthcoming
Abstract:
This study extends the behavioral theory of the firm by examining how functional subgroups within organizations influence strategic decision-making differentially across hierarchical levels. We argue that a larger proportion of managers in a specific functional subgroup within an executive team causes this group to focus the organization’s strategic agenda on those issues that this functional subgroup considers most important. However, within a functional subgroup, the issues to which managers pay attention can vary between hierarchical levels, with senior managers’ attention shaped by higher-level strategic schema, and lower-level managers’ attention shaped by local, more operational stimuli. We test our theory using data from 1,064 U.S. hospitals, 6,218 executives, and Medicare-adjusted pricing for hospitals’ shoppable services. Our analysis focuses on two key functional subgroups: the revenue subgroup, which focuses on financial sustainability, and the medical mission subgroup, focused on quality and accessible healthcare. We find that a higher proportion of revenue-focused managers at the system level is associated with higher insured pricing. In comparison, a higher proportion of system-level medical mission managers is associated with lower pricing. Interestingly, at the hospital level, a greater proportion of medical mission managers correlates with higher insured pricing, likely reflecting efforts to secure additional resources. Posthoc analyses further clarify the mechanisms behind these relationships. Our results highlight that functional subgroups are not monolithic; their managers’ perspectives can vary with their relative position in the organizational hierarchy, and this can provide an important mechanism of conflict resolution.
Regulating the Innovators: Approval Costs and Innovation in Medical Technologies
Parker Rogers
Indiana University Working Paper, December 2025
Abstract:
I examine how FDA regulation shapes innovation, market structure, and product safety by leveraging deregulation events that affected some established medical device types but not others. Linking FDA records, patents, and health insurance claims, I find that deregulation increases the quantity and quality of new technologies — especially among smaller, less-experienced firms — increases entry, and reduces medical procedure prices. Severe adverse events do not increase; for mature technologies and in higher-liability settings, they decline, consistent with postmarket measures (standards and liability) substituting for premarket review. These results clarify when targeted deregulation can expand innovation without sacrificing safety.
Data Privacy and Medical Innovation: The Case of GDPR
Jennifer Kao & Sukhun Kang
University of California Working Paper, January 2026
Abstract:
We examine how data privacy regulation affects healthcare innovation and research collaboration. The European Union’s General Data Protection Regulation (GDPR) aims to enhance data security and individual privacy, but may also impose costs to data collection and sharing critical to clinical research. Focusing on the pharmaceutical sector, where timely access and the ability to share patient-level data plays an important role in drug development, we use a difference-in-differences design exploiting variation in firms’ pre-GDPR reliance on EU trial sites. We find that GDPR led to a significant decline in clinical trial activity: affected firms initiated fewer trials, enrolled fewer patients, and operated at fewer trial sites. Overall collaborative clinical trials also declined, driven by a reduction in new partnerships, while collaborations with existing partners modestly increased. The decline in collaborations was driven among younger firms, with little variation by firm size. Our findings highlight a trade-off between stronger privacy protections and the efficiency of healthcare innovation, with implications for how regulation shapes the rate and composition of subsequent R&D.
Patient Peer Effects: Evidence from Nursing Home Room Assignments
Alden Cheng & Martin Hackmann
NBER Working Paper, December 2025
Abstract:
We provide causal evidence that patient peer effects generate mortality impacts comparable to provider quality differences. Drawing on administrative records covering 2.6 million stays (2000-2010) across 7,200 U.S. nursing homes, we exploit plausibly exogenous roommate assignments identified through unique room identifiers. We estimate that assignment to a roommate diagnosed with Alzheimer’s disease (AD) or Alzheimer’s disease related dementias (ADRD), relative to placement in a private room, increases 90-day mortality by 2.1 percentage points (14% of baseline) — equivalent to receiving care at a nursing home one full standard deviation worse in quality. Effects differ sharply by patient type: patients with AD/ADRD benefit substantially from cognitively healthy roommates but not from private rooms, suggesting important peer monitoring and support roles. In contrast, mortality of patients without AD/ADRD does not depend on roommate cognitive health but is reduced in private rooms. A simple assignment rule exploiting this heterogeneity could reduce overall mortality by 0.8 percentage points without additional resources.
Growth In Number Of Practices And Clinicians Participating In Concierge And Direct Primary Care, 2018-23
Jane Zhu et al.
Health Affairs, December 2025, Pages 1473-1481
Abstract:
Primary care clinicians have expressed growing interest in concierge and direct primary care practices, which often feature smaller patient panels and greater clinical autonomy compared with traditional primary care models. We assessed practice and workforce characteristics using a national sample of concierge and direct primary care practices identified through novel linkages of public and proprietary data. From 2018 to 2023, the number of direct primary care and concierge practice sites grew by 83.1 percent and the number of clinicians participating in them by 78.4 percent. The share of clinicians in concierge and direct primary care practices who were physicians declined from 67.3 percent to 59.7 percent, whereas the proportion of advanced practice clinicians increased. Approximately 60 percent of these clinicians participated in Medicare, suggesting concierge or hybrid practice. Independent ownership decreased from 84.0 percent to 59.7 percent, whereas corporate-affiliated practices grew by 576 percent during this period. The growth in these primary care models may offer substantive benefits to patients and clinicians, but it also raises broader questions about changing clinical practice and access to care.
Disentangling Sources of Variation in C-Section Rates
Stefanie Fischer et al.
NBER Working Paper, November 2025
Abstract:
Cesarean section rates vary widely across U.S. counties, yet it remains unclear how much of this variation reflects demand-side factors (such as patient risk or preferences) versus supply-side factors (such as physician practices or hospital incentives). We develop a new empirical strategy to isolate the influence of supply-side forces. Exploiting hospital obstetric unit closures from 1989-2019 that reallocate some mothers to counties with different C-section rates, we find that a one-percentage-point increase in the delivery county’s rate raises a mother’s likelihood of a C-section by roughly one point. The results point to a dominant role for provider behavior and local practice norms in driving geographic variation in C-section use, the most common major surgery in the United States.
Follow-On Cancer Drugs Target Earlier Stages Than Initial Drugs: Implications Of The IRA
Tomas Philipson et al.
Health Affairs, December 2025, Pages 1448-1456
Abstract:
The Inflation Reduction Act (IRA) of 2022 mandates price negotiations for certain drugs under Medicare, shortening the exclusivity period historically used to recoup research and development investments and support follow-on innovation. This article characterizes the clinical significance of follow-on oncology drug approvals, using a novel data set of Food and Drug Administration oncology drug approvals from the period 2000-24. We found that, compared with initial approvals, follow-on drugs target earlier disease stages, where therapeutic success is often more likely. Among 184 cancer drugs analyzed, 41.8 percent had at least one follow-on approval, with 59.7 percent of those targeting earlier disease stages than the original approval. The average reduction in disease stage between original indication approval and follow-on approval was 0.54. The shortened exclusivity period under the IRA may have influenced these development trajectories. One potential effect is a shift from depth-oriented development toward horizontal expansion across tumor types or patient populations. This shift may disproportionately affect small-molecule drugs, which (compared with biologics) more commonly rely on sequential, indication-by-indication development.
The impact of vertical integration on health care delivery and costs: Evidence from physician-pharmacy integration
Pragya Kakani
Journal of Health Economics, December 2025
Abstract:
Vertical integration among health care providers is an increasingly common feature of U.S. health care. This study investigates the impact of vertical integration in the context of oncology practices launching in-house pharmacies dispensing high-cost oral cancer treatments using a stacked event study design. I find physician-pharmacy integration lowers point-of-sale drug prices paid by plans due to 1.0% lower prices at in-house pharmacies. I also find physician-pharmacy integration increases the number of patients filling new prescriptions by 6.2% and reduces time-to-fill for new prescriptions requiring prior authorization. These effects may arise because in-house pharmacies individually have limited bargaining power and due to decreased coordination costs, reflected by faster prior authorization.
Racial and Ethnic Disparities in Prehospital Restraint Use and Sedation
Thomas McAdam et al.
American Journal of Preventive Medicine, December 2025
Methods: Using the 2022 ESO Data Collaborative consisting of ∼12,000,000 emergency medical service (EMS) healthcare encounters, this study estimated associations between race and ethnicity (non-Hispanic White, Black/African American, Hispanic any race, Asian, or American Indian/Alaskan Native) and physical restraint and/or sedation use (yes, no) among patients ≥15 years of age who had an EMS encounter for a behavioral health emergency. Adjusted odds ratio (aOR) estimates with 95% confidence intervals (CIs) are presented.
Results: Approximately 7.1% (n=3,799) of behavioral health encounters involved any restraint or sedation use. Compared to non-Hispanic White patients, all racial and ethnic minoritized groups were more likely to receive physical restraints (aOR range:1.62-2.72, p<0.05), while Black/African American, Hispanic, and American Indian/Alaskan Native patients were more likely to be sedated with antipsychotics or benzodiazepines (aOR range:1.27-3.21, p<0.05). Black/African American patients were also more likely than non-Hispanic White patients to be concurrently restrained and sedated (aOR:1.30, CI:1.09, 1.55).
Hedging or Healing: How Business Cycle Exposure Affects the Safety Net
Kimberly Cornaggia, Xuelin Li & Zihan Ye
Pennsylvania State University Working Paper, November 2025
Abstract:
Tax exemption and government support are intended to insulate non-profit hospitals from business cycles, who are expected to provide stable community benefits. This paper documents erosion in the stability of this social safety net. The rising popularity of high-deductible health plans (HDHPs) reduces insurance risk sharing and increases the cyclicality of hospital operations. Realized income shocks induce more ex post procyclical responses in hospital revenues and utilization in markets with higher pre-shock HDHP penetration. Claims data confirm that HDHP enrollees reduce inpatient visits in downturns. Ex ante, hospitals hedge this exposure by cutting staff, investment, uncompensated care, and Medicare admissions. Surprisingly, mission-driven non-profit hospitals hedge more aggressively, reflecting their lack of geographic diversification and internal capital markets compared to large for-profit systems. Counties with higher pre-pandemic HDHP prevalence and non-profit dominance experienced greater COVID-19 mortality.