Pierre Azoulay, MA, PhD
Assistant Professor of Management, Columbia University
Graduate School of Business,
Faculty Research Fellow at the National Bureau of Economic Research

Medical Progress and Health Care Financing: Research in Academic Medical Centers Following the 1997 Medicare Cuts

February 6, 2004
12:00 - 1:30 PM

Colonial Penn Center Auditorium

                 Abstract   Paper

In his research, Professor Azoulay investigates the organization and governance of knowledge-intensive firms: What determines their boundaries? What are the mechanisms that prevent knowledgeable insiders from leaving with their human capital at anytime? What are the pitfalls involved in knowledge-production outsourcing? How do internal capital markets operate, and what role do they play beyond resource allocation? Can established firms reproduce market incentives inside the firm? Using tools from organizational economics, his research combines qualitative and econometric evidence to shed light on these issues. He teaches a core-level course on strategy and an elective course on the management of technology and innovation.

We ask whether reforms designed to contain the growth of health care expenditures have the unintended consequence of changing the level and altering the composition of research performed inside academic medical centers. We study the effect of the Balanced Budget Act of 1997, which changed the formula used to reimburse Medicare inpatient claims. We compare teaching hospitals’ relative exposure to the reform and how these differences affect their researchers’ ability to attract grants from government and industry sources. We find that the elasticity of NIH grant awards with respect to an exogenous change in reimbursement levels is about 0:15: There is no discernable effect on clinical trials grants from pharmaceutical firms. Research performed by physician-scientists is more affected than that of PhD investigators. Similarly, research dealing with human subjects is more affected than non-clinical research. Our analysis implies that government-funded research and hospital cross-subsidies from clinical care are complements rather than substitutes, and suggests that health care financing might impinge on future health outcomes, through its effect on the rate and direction of technological change.

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