Safety net healthcare providers and the business cycle: What can we learn from substance use disorder treatment providers?

The financial stability of healthcare providers operating in the social safety net and those serving disadvantaged populations is of substantial policy concern.  Such providers operate with precarious financing and may be particularly vulnerable when economic conditions deteriorate.  In this study we examine how substance use disorder (SUD) treatment providers vary service provision across the business cycle.  SUD treatment is heavily financed by public payers in the United States and, as such, can potentially shed light on the broader class of safety net providers.  Moreover, SUD providers deliver care to particularly vulnerable members of society: the poor and uninsured who suffer from highly disabling, chronic SUDs.  Finally, under the Patient Protection and Affordable Care Act, Medicaid, is expected to become the principle source of domestic financing for SUD treatment.  This is the first study to explore the relationship between SUD providers and the business cycle.

Using detailed administrative data from the National Survey of Substance Abuse Treatment Services between 2000 and 2012, we consider the response of SUD providers across several margins: the number of clients receiving treatment, treatment setting, accepted payment forms, offered services, programs for special populations, and use of pharmacotherapies. We use within-state variation in unemployment rates to identify treatment effects.  To address concerns regarding omitted variables we control for state characteristics, state and year fixed effects, and state-specific linear time trends in all regression models.  We also explore heterogeneity in provider response by ownership status: for-profit vs. non-profit.

Our findings suggest that a 1 percentage point increase in the state unemployment rate leads to a 1.8% reduction in outpatient clients, and a 0.2%, 1.1%, 0.9%, and 1.8% increase in the acceptance of self-pay, Medicaid, other public insurance, and private insurance as a form of payment. We find no evidence that the provision of charity care, offered services, or special programs are impacted by changes in the state unemployment rate.  However, a 1 percentage point increase in the state unemployment rate leads to a 2.5% increase in the probability that a provider uses pharmacotherapies. Models stratified by ownership status produce similar results.

These findings suggest that during recessions SUD providers reduce provision of treatment in outpatient settings, expand the set of accepted payment forms, and increase use of pharmacotherapies. Importantly we find no decline in the provision of charity care, offered services, and programs for special populations as economic conditions deteriorate.  We find for-profit and nonprofit providers respond to business cycle changes in similar ways.  Collectively these findings suggest that SUD providers reduce the quantity, but not the quality, of care during economic downturns.  Somewhat surprisingly, access to care for specific populations may increase during downturns; we suspect this increase in access is due to providers’ attempts to find new revenue streams as overall demand for treatment declines.  These findings broaden our understanding of the relationship between economic downturns and health, in particular the role of safety net healthcare providers.