Empirical Studies in the Economics of Community Health Centers
Open AccessCHCs are community-oriented non-profit organizations that deliver outpatient health care services to medically underserved areas, consisting of the largest safety net of primary medical care in the U.S. While literature has shown CHCs’ ability to provide affordable and high-quality primary care to their patients, little is known about how this group of providers respond to market incentives. This dissertation research uses three essays to separately examine how economies of scope, Medicaid payment policies, and market structure affect CHCs’ costs, utilization, and quality of care.The first essay examines whether integrating multiple types of health services in the primary care setting of CHCs generates economies of scope. Comparative statics show that while safety-net providers weigh economic returns differently than for-profits, the potential benefits (or losses) associated with joint production remain relevant given cost constraints. Empirically, I take advantage of administrative data on all federally-funded CHCs, employing a multi-product cost function approach. I find that while CHCs deliver a higher service volume than would be expected under profit-maximization, the co-location of comprehensive services yields substantial savings. On average, integrating primary and behavioral health care reduced per-patient costs by 24%. Integrating primary and dental care reduced costs by 19%. From a policy perspective, these findings are useful given that under statute CHCs may not turn away patients based on ability to pay, and are required to provide a variety of basic services despite budgetary pressure. The second essay examines the effect of state Medicaid payment rate structure on utilization of co-located primary, dental, and mental health services in CHCs. I estimate the policy effect using both the difference-in-difference approach and synthetic control methods. Point estimates of the preferred specification show that compared to states that pay a uniform all-inclusive rate for all types of health services, paying service-specific rates impacted the service mix. However, the estimated policy effects are not statistically significant. The null policy effect indicates that CHCs may be insensitive to reimbursements for dental or mental health services. It may also be due to methodological issues such as small sample size and the lack of accurate Medicaid reimbursement data. Future research is needed to further investigate this issue with patient-level data. The third essay assesses the impact of competition on quality in the CHC market. To ensure financial viability, CHCs could raise service quality to compete for federal grant funding and patients with relatively higher ability to pay. Using patient flow data from all federally funded CHCs, I construct a CHC-specific Hirschman-Herfindahl index to measure market concentration. I use area-level input prices and characteristics of competing CHCs’ competitors to instrument for market concentration and competitors’ service quality. I find that higher competitors’ quality is associated with higher quality at the indexed CHC, while the positive effect diminishes as the local market becomes more concentrated. Further analyses show that the beneficial quality effect is less pronounced in markets where a significant proportion of CHC visits are uninsured, suggesting that competition could pose downward financial pressures on CHCs that disproportionally serve low-income populations.
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