Managers and Public Hospital Performance*

Abstract

We study whether, and how, managers can increase government productivity in the context of public health provision. Using novel data from public hospitals in Chile, we document that top managers (CEOs) account for a significant amount of variation in hospital mortality. We then use a staggered difference-in-differences design, and show that a reform which introduced a competitive selection system for recruiting CEOs in public hospitals reduced hospital mortality by approximately 8%. The effect is not explained by a change in patient composition and is robust to several alternative explanations. The financial incentives included in the reform—performance pay and higher wages—do not explain our findings. Instead, we show that the policy changed the pool of CEOs by displacing older doctors with no management training in favor of younger CEOs who had studied management. The mortality effects were driven by hospitals in which the new CEOs had managerial qualifications. These CEOs improved operating room efficiency and reduced staff turnover. *First version: October, 2022. Cristóbal would like to thank Emmanuel Saez, Gabriel Zucman, Sydnee Caldwell, and Fred Finan for their invaluable mentorship, support, and advice. We thank Nano Barahona, Ernesto Dal Bó, Chris Campos, David Card, Álvaro Carril, José Ignacio Cuesta, Kaveh Danesh, Patricio Dominguez, Nick Flamang, Felipe González, Pat Kennedy, Pat Kline, Jon Kolstad, Sebastián Otero, Mónica Saucedo, Damián Vergara, and Harry Wheeler for valuable comments and suggestions. We also thank Ewald Landsberger and his team at the Civil Service for very useful feedback on institutional details and support for this research project. Antonia Aguilera, Javiera Flores, Alfredo Habash, Amalia Recabarren, and Gaspar Villarroel provided excellent research assistance. We are indebted to Josefina Edwards, who provided outstanding support and endless dedication in the data collection process. We gratefully acknowledge financial support from the Institute for Research on Labor and Employment at UC Berkeley, the Burch Center for Tax Policy and Public Finance, and the Stone Center on Wealth and Income Inequality at UC Berkeley. Finally, we thank Subsecretarı́a de Redes Asistenciales of the Chilean Ministry of Health for data access. † Department of Economics, UC Berkeley. Email: cotero@berkeley.edu. ‡Departamento de Ingenierı́a Industrial, Universidad de Chile. Email: pablomh@uchile.cl.