Job Market Paper: Does Hospital Leadership Matter? Evidence from Pay-for-Performance

Abstract

Managers are often seen as drivers of firm decisions, strategies, and performance. Further, manager characteristics have been linked to employee wages, decisions of mergers and acquisitions, and financial performance. Health care policies in the US often focus on improving quality of care without increasing costs, and yet it is unclear whether hospital managers might contribute to this goal. In this paper, I estimate the differential response to such quality incentives by different types of nonprofit hospital executives, those with and without a clinical training background. I find that hospitals without clinically trained executives respond more to the financial incentives than those with clinically trained executives. I provide evidence that this may be due to differing preferences for profit vs. patient welfare. Thus, incentivizing clinically trained executives in hospitals could be an effective method to improve value in the US health care system.