Evaluating the Effect of State-Level Co-production Regulation on Healthcare Providers: A Synthetic Control Approach

• In Event: Governance Transitions, Network Dynamics, and Organizational Adaptation

Abstract

Over the past three decades, policy implementation research has documented a significant transition from hierarchical command-and-control models toward New Public Governance. Within this paradigm, co-production has emerged as a key policy instrument, promising increased responsiveness, effectiveness, and democratic legitimacy (Howlett et al., 2017; Sorrentino et al., 2018). However, concerns remain that initiating co-production may be cost-inefficient; transaction costs, including coordination, resistance, and structural adjustments, are often high during the early stages and may fluctuate over time. Despite its importance, systematic evidence is scarce regarding whether making co-production compulsory influences cost-efficiency in the long run. While existing management literature focuses on program-specific outcomes or participant motivation, there is a clear need for causal evidence examining the impact of co-production mandates at the state level.  This study investigates the impact of mandatory co-production policies on the cost-efficiency of state-level healthcare providers from 2002 to 2019. We specifically examine the 2008 Massachusetts law that mandated all acute-care hospitals to establish co-production initiatives through Patient and Family Advisory Councils (PFACs). Furthermore, we analyze the marginal effect of time, testing the hypothesis that coordination costs peak during early implementation but diminish as the policy matures and becomes institutionalized. By combining state-level aggregated data from the RAND CMS Medicare Cost Reports with general state-level controls, this study employs a synthetic control method. This approach allows for a robust comparison between Massachusetts and a matched pool of neighboring states without such mandates.  Preliminary results support our hypothesis that adopting mandatory co-production policies can improve the cost-efficiency of healthcare providers over the long term. Specifically, marginal-time analysis reveals that while costs spike during the initial adoption phase, they dissipate as the policy becomes embedded within the system. This study contributes to the field by providing longitudinal and quasi-experimental evidence of the regulatory effects of co-production policy on healthcare providers' efficiency, while clarifying how its impact on efficiency evolves through the process of institutionalization and internal adjustment.

Authors

• Jinyoung Cha, Louisiana State University - Shreveport
  Presenting Author

• Kunmo Yeon, Florida State University
  Non-Presenting Co-Author

• Jaeyoung Jang, University of North Carolina, Charlotte
  Non-Presenting Co-Author