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Title: Medicare Hospital Payment Adjustments and Nursing Labor Markets

Citation Type: Miscellaneous

Publication Year: 2015

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Abstract: Compared to the extensive study on the effects of Medicare payment in hospital markets and on physician behavior, almost no work has been done on the effects of Medicare hospital payment on the labor market for nurses. This study deals with the hospital wage index (HWI) adjustment to Medicare payments, a geographic adjustment intended to compensate hospitals in high-cost labor markets, and examines two potential consequences of HWI adjustment on nurses labor. First, we examine whether hospitals in highly-concentrated markets exploit their ability to influence their own wage index by paying nurses more. Second, we examine whether the Occupational Mix Adjustment (OMA) to the HWI affected nurse employment. We test for both consequences in U.S. hospitals between 1999 and 2009 and in empirical models that also allow us to examine support for classic monopsony power. We find no evidence that hospitals wield monopsony power to reduce nurses wages or employment during our study period, nor do we find that existing HWI adjustment methods lead to higher wages. However, we do find evidence that hospitals responded to the implementation of the OMA by hiring fewer highskilled nurses, which implies that hospitals were gaming Medicare wage adjustment rules prior to 2005.

Url: http://www.sole-jole.org/16179.pdf

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Authors: McHenry, Peter; Mellor, Jennifer M

Publisher: Department of Economics and Thomas Jefferson Program in Public Policy at the College of William and Mary

Data Collections: IPUMS USA

Topics: Health, Other

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