Economics Job Candidate Seminar

Abstract: We have a limited understanding of how nurses, physicians, and patients interact to produce high quality care but these interactions are central to efficient regulatory design. This paper estimates a value-added production model for hospital quality in nurses per patient, physicians per patient, and patient health using identifying variation from the 1999 California nurse staffing mandate - the first and to date one of few pieces of comprehensive legislation of nurse staffing levels in hospitals. I find nurses and physicians to be highly complementary (near Leontief) in production. I show that minimum nurse-to-patient ratios that do not account for these complementarities increase healthcare labor costs by 1.4 percent holding quality constant amounting to $24 million in costs across hospitals affected by the mandate. On average, I do not find evidence of across-hospital misallocation of nurses to low productivity hospitals due to ratio regulation - low staffing hospitals are as productive as their high staffing neighbors - but I find allocative gains can be made by reallocating nurses to hospitals with higher severity patients where they are more valuable.