Summary
Health care firms are filing for Chapter 11 bankruptcy at record rates. Authors find that bankruptcies increase health care staff turnover, worsen care, and ultimately harm patients. Using a difference-in-differences design, authors estimate that a bankruptcy filing immediately increases staff turnover and worsens performance on unannounced inspections. Next, using a patient-distance-to-facility instrument, they document that bankruptcies cause alarming harm to patient health: bankruptcies increase hospitalizations, physical-restraint use, and bedsores. Finally, the authors employ a randomized survey experiment of nursing home staff to confirm that bankruptcy filings increase voluntary departures and that replacement hires are likely to be less effective and harm patients.