3 Essays in the Economics of Kidney Failure

Abstract

This dissertation is the first to explore treatment for kidney failure as a holistic market, where dialysis, deceased donor transplantation, and living donor transplantation are three separate treatment options within a common market rather than as entirely separate markets. The first chapter investigates the effectiveness of regulatory deterrence in the context of deceased and living donor transplantation. The Centers for Medicare and Medicaid Services (CMS) enacted conditions of participation for transplant centers in 2007. This effectively led to dual regulatory oversight by the Organ Procurement Transplantation Network and CMS. This policy change led to an increase in the expected penalty for violating pre-existing quality thresholds. The probability of being flagged for a quality violation just prior to the policy change is a continuous treatment in a differences-in-differences regression model. The more punitive regulatory regime was at least as effective as the prior regime in enforcing the quality mandates. Still, it came at the cost of a reduced transplant rate amongst centers most at risk of being flagged for a quality violation and increased firm exit, especially amongst smaller firms. In addition, small remote centers were the most likely to exit the market, suggesting disproportionate harm to rural patients. The second chapter uses a finite horizon discrete choice model to estimate willingness to pay for expanding access to kidney transplantation. Patients are treated with dialysis until they receive a transplant. Patients choose whether to wait for a deceased donor transplant or to receive quick access to a living donor transplant from a close relative or friend. I find that willingness to pay is similar between black and white patients but that black patients experience much larger gains in life expectancy. The third chapter explores the unintended consequences for the dialysis industry when access to transplantation is expanded. Economic theory predicts that the least efficient firms will exit first when demand declines. However, it is an empirical question if the least efficient firms are high-quality or low-quality. State policies serve as plausibly exogenous transplant shifters in a 2 stage least squares regression model. I find evidence of short-run quality improvements but long-run quality decline. Hospitalizations decline in the short run, but mortality increases in the long run.