Returns to Local-Area Healthcare Spending: Using Health Shocks to Patients far from Home

Abstract

Health care spending varies widely across markets, and previous research finds little evidence that higher spending translates into better health outcomes. The main innovation in this paper exploits this cross-sectional variation in hospital spending in a new way by considering emergency patients who are exposed to healthcare systems when they are far from home. Visitors to Florida who become ill in high-spending areas have significantly lower mortality rates compared to visitors in lower spending areas. The results are robust within groups of similar visitors and within groups of destinations that appear to be close demand substitutes -- areas that likely attract similar visitors.