Merchants of Death

That is the clever title of recent American Economic Review publication by Cyrus Aghamolla, Pinar Karaca-Mandic, Xuelin Li, Richard T. Thakor. The abstract is below.

This study examines the link between credit supply and hospital health outcomes. We use bank stress tests as exogenous shocks to credit access for hospitals that have lending relationships with tested banks. We find that affected hospitals shift their operations to increase resource utilization following a negative credit shock but reduce the quality of their care to patients across a variety of measures, including a significant increase in risk-adjusted readmission and mortality rates. The results indicate that access to credit can affect the quality of health care hospitals deliver, pointing to important spillover effects of credit market frictions on health outcomes.

You can read the full paper here.