Healthcare Privatization and Patient Health: Evidence from Puerto Rico

• In Event: Provider Supply and Assessment

Abstract

Background: Public health systems increasingly buy care from private providers. Yet, little is known about how patients fare when an entire public delivery system moves to private management. Objective: This paper estimates how such a transition affects patient health and healthcare supply. Methods: I study Puerto Rico's 1993 health reform, which transferred public health centers and hospitals to private operators, replaced salaried public providers with capitated private managed care, and introduced income-tested eligibility, reaching the island's 78 counties in six cohorts between 1994 and 2000. Using a 1990–1999 county panel from government statistics, digitized vital-statistics reports, QCEW employment data, and Medicare provider files, I apply the Callaway and Sant'Anna (2021) estimator with not-yet-treated counties as controls. Results: Births shifted from government to private hospitals. All-cause mortality rose 3.7 percent above its pre-treatment mean in treated counties, relative to not-yet-treated counties. Early prenatal care fell 3.0 percent and low birth weight rose 6.8 percent. Ambulatory care employment ran 9.6 percent below its counterfactual, with 6.5 percent fewer establishments and 3.4 percent fewer certified hospitals per resident. The mortality effect holds under conditional trends and alternative robust estimators. Conclusions and implications: The reform raised mortality and slowed healthcare supply growth, consistent with theory., Governments expanding private management of public care should weigh patient health and provider capacity alongside spending.

Author

• Dayanara M Diaz Vargas, Northeastern University
  Presenting Author