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Examining the economics of health care

By Bradley West '13
July 11, 2012

This summer Assistant Professor of Economics Ashley Hodgson (right) and Ryan Peterson '14 are researching the impact of a California health care law.

As debates about health care policy heat up around the nation, many economists are using their expertise to explore the unforeseen consequences of new laws.

Assistant Professor of Economics Ashley Hodgson and student Ryan Peterson '14 are among them. This summer they've teamed up to research a 2004 California law that mandates the minimum nurse-to-patient ratio in hospitals throughout the state. Their research, which is part of St. Olaf College's Collaborative Undergraduate Research and Inquiry (CURI) program, aims to determine the impact the law has had on patient care.

Hodgson, who specializes in health care economics and now teaches a course on the subject, spent her graduate school career at the University of California, Berkeley, examining hospital data sets kept by the state. But as she adjusted to her first year as a professor at St. Olaf, Hodgson had to put her research interests on a brief hold. "Teaching full time was definitely a learning experience for me," she says. "I threw all my energy into teaching over the school year and didn't have time to engage with my research."

So when summer came around, Hodgson chose to take part in the CURI program, which would allow her both to work with a student and to pursue her research interests further. She selected Peterson, an economics major who is likewise fascinated by the health care system, as her student collaborator.

"I come from a family of doctors, but I don't want to go into medicine myself," Peterson says. "Instead, I'd like to approach the health care industry from the field of economics, since they need bright people to examine how public policy affects treatment patterns."

In other words, Hodgson's project, which examines the consequences of one policy change (the nursing ratio law), fits perfectly with Peterson's academic interests and possible career ambitions.

By studying this one specific but far-reaching policy change, Hodgson and Peterson hope to learn exactly how the nursing ratio law changed the quality and type of care available in hospitals throughout California. Since she studied the economics of California's health care system as a graduate student, Hodgson already had all the necessary financial data and care records, which were culled from nearly 500 hospitals and cover the years 2001-10.

With the data already in hand, the researchers then decided which variables to examine in the hope of finding a statistically significant change after the law took effect. These variables include, for example, the number of psychiatric diagnoses, the frequency of drug administration, and the chance that a hospital would treat a patient with no health insurance (known as charity care). 

Since picking the variables to study, Hodgson and Peterson have been developing econometric models to fit the data and performing statistical analyses.

As if all this heavy number-crunching weren't enough to keep one busy all summer, Hodgson is also at work on two other research projects related to health care. One of these deals with questions about growth in health care costs, and the other explores the impact that doctors' conferences might have on care costs in the United States.

Hodgson says working with a student collaborator has helped her immensely as she continues to pursue these research goals.

"It's been wonderful to have Ryan around every day, to have someone to check in with and keep me on track with these projects," Hodgson says. 

Peterson is likewise enthusiastic about all that he has done as part of the CURI program. He says it's "awesome to work one on one with a faculty member" as they explore questions at the cutting edge of economic research.

Hodgson and Peterson will present their findings on the effects of the nursing ratio law at the final CURI symposium on August 3. If any of their results are especially notable, they plan to write a paper on the subject throughout the coming school year.

Contact Kari VanDerVeen at 507-786-3970 or