Returns to Local-Area Healthcare Spending: Evidence from Health Shocks to Patients Far From Home

Am Econ J Appl Econ. 2011 Jul;3(3):221-243. doi: 10.1257/app.3.3.221.


Healthcare spending varies widely across markets, and previous empirical studies find 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 patients who are exposed to healthcare systems not designed for them: patients far from home when a health emergency strikes. 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.