Yu Chu Shen

Yu Chu Shen

Professor of Economics, Naval Postgraduate School
Faculty Research Fellow, National Bureau of Economic Research

Dissertation Title: "The Effect of Market Reforms and Ownership Choice on the Quality of Care in Hospitals"This thesis explores how market reforms in the third party payer system and hospitals' choice of ownership status affect the quality of care in hospitals, using patient health outcomes after treatment for acute myocardial infarction as quality indicators. The sample of analysis consists of a 10-year panel of all general, acute, short-term stay hospitals in the continental United States between 1985 and 1994.

The first chapter examines the effect of financial pressure on the quality of care in hospitals. The two financial pressure variables are: policy changes in Medicare reimbursement formulas for inpatient care, and changes in health maintenance organization (HMO) penetration at the county level. I find that financial pressure adversely affects short-term health outcomes, but does not affect patient survival beyond one year after patients' hospital admissions. Furthermore, the impact of HMO penetration appears to differ from that of policy changes in Medicare for certain hospitals (hospitals in competitive markets, teaching, and for-profit hospitals) because HMO encourages price competition.

The second chapter focuses on the identification of the effect of hospital ownership on the quality of care in hospitals. I find strong evidence that not-for-profit (NFP) hospitals indeed produce better health outcomes than for-profit (FP) or government hospitals by 3-4%. The results are consistent under different model specifications, and are robust to whether I use the entire sample or smaller samples that match hospitals based on the propensity score method or on the geographical distance.

The third chapter examines changes in the quality of care in hospitals after ownership conversions that occurred between 1987 and 1994. I find that the incidence of adverse outcomes increases by 7-9% following an ownership conversion to FP status. However, there is very little change in the patient outcomes for hospitals that convert to NFP or government status. The results are not driven by the change in patient mix or the presence of rough transitions following the conversion, but could be explained by the reduction in staffing ratio.


Graduation Year


Dissertation Committee Member