States have emerged as laboratories to test policies to contain health care spending. In 2010, Rhode Island adopted novel affordability standards that reduced commercial prices and hospital revenues. How hospitals responded operationally to the standards is unknown. For instance, Rhode Island hospitals may have sought to reduce labor costs, as these make up the majority of hospitals' operating expenses. Using Medicare labor survey data, we performed a difference-in-differences analysis to evaluate the impact of the standards on staffing and wages for Rhode Island hospitals. We found that by 2022, the standards had resulted in a substantial reduction in labor costs relative to control hospitals. For registered nurses, the standards decreased staffing per bed by 13.4 percent and reduced wages by 3.8 percent from 2006 to 2022. Among US states, Rhode Island hospitals' ranking on staffing per bed for registered nurses fell from twenty-first before implementation of the standards to thirtieth after, whereas its ranking on wages for registered nurses remained at fifteenth. Our results suggest that Rhode Island's affordability standards led to substantial reductions in hospital staffing and labor costs. Policy makers should monitor and assess potential trade-offs, particularly for the quality of care, associated with cost control and delivery system capacity.
Mehta et al. (Mon,) studied this question.