Working Papers
The Cost of Clarity: Tradeoffs to Public Investments in Rural Diagnostic Care JMP
Abstract
Rural hospitals face financial constraints that hinder investment in new medical technologies. Disinvestment contributes to regional disparities in health care quality, particularly in capital-intensive service lines like imaging, where reliance on outdated equipment increases the risk of diagnostic errors. To address access gaps, recent policy efforts have funded investment subsidies for rural hospitals. By expanding access to advanced medical technologies, these policies can meaningfully improve clinical outcomes for underserved rural populations. However, housing high-cost technologies at low-volume rural hospitals may not be cost-effective. This paper examines the cost-access trade-off associated with deploying expensive diagnostic equipment in rural markets by studying the diffusion of 3D-mammography (3DM). My analysis focuses on the market for breast cancer screenings in rural Georgia, where a subsidy for rural hospitals alleviated financial constraints, facilitating the adoption of 3DM. Leveraging changes in geographic access to 3DM over time, I demonstrate how distance to 3DM affects patients' technology choices and screening outcomes. Following the adoption of 3DM at a rural hospital, I estimate a 45 percentage point increase in the probability that local patients will screen with 3DM instead of 2D mammography (2DM). Increased 3DM uptake improves local screening outcomes, reducing the average likelihood of a false-positive screening by 1.8 percentage points (21 percent). To study the effect of subsidized technology adoption, I estimate a structural model of demand for mammography. Counterfactual analyses show that a blanket investment policy funding 3DM upgrades at every rural hospital is inefficient, resulting in over-investment in high-access markets where adoption is socially redundant, or in sparsely populated markets that cannot sustain sufficient demand. Welfare is maximized by a targeted investment policy that allocates 3DM scanners to hospitals operating in midsize markets where patients are geographically isolated from incumbent 3DM providers.
Presented at
-ASHEcon 2025, Emerging Scholars Session: Economics of Hospital Care
-Atlanta/Athens Health Economists Job Candidate Conference (2025)
-SEA 2025, Session: Health Economics (Upcoming)
Investing in Access: The Impact of Hospital Subsidies on Healthcare Supply in Rural Areas
Abstract
Rural hospitals receive a significant portion of their revenue from government subsidies. However, we know little about how rural hospitals use government funds, as prior research has focused exclusively on urban and suburban hospitals. In this paper, I assess how rural hospitals allocate government subsidy dollars as well as the impacts of increased subsidization on rural hospital profitability and access to care in rural communities. I exploit variation arising from a Georgia policy that sharply increased subsidies to rural hospitals and estimate difference-in-differences models that compare outcomes of rural Georgia hospitals to rural hospitals in other southern states before versus after the policy change. Using financial data from Medicare cost reports, I find that rural hospitals invest subsidy dollars in physical capital. Rural hospitals put 75-cents of every additional subsidy dollar into fixed assets like medical equipment and facilities. After making these investments, rural hospitals house new diagnostic imaging tools and see increased utilization of inpatient services. With higher patient volumes, subsidized hospitals earn higher profits from medical operations. These results suggest that rural hospitals respond to increased subsidization by making investments in physical capital that bolster profits and increase access to care in rural communities.
Presented at
-SEA 2024, Session: Health, Education, and Welfare
-ASHEcon 2025, Session: The Effects of Hospitals and the Healthcare Workforce on Patient Care