Abstract/Description

Working with the Kenyan Cabinet and Ministry of Health, we experimentally evaluated the market-level impacts of healthcare regulation in settings with public and private providers. We randomly allocated 273 markets with 1258 facilities to treatment and control arms and in treatment arms, facilities were inspected to assess compliance with minimum patient safety standards with the potential for closure. To accurately capture how regulation functions in low-capacity environments, inspections and facility closures were carried out by the government using their own staff. The intervention (a) increased compliance with the patient safety checklist in both public and private clinics (more so in the latter); (b) increased closures of clinics without licenses and (c) reallocated patients from private to public clinics, primarily in markets with a facility closure. A decomposition approach shows that 93% of the increase in compliance with patient safety measures was due to improvements within facilities, rather than exits or changes in market shares. The intervention had no impact on patients’ out-of-pocket payments, and we find no evidence of declines in facility use, either in the aggregate or for poorer patients. We then examine three classes of mechanisms: An information channel, a compliance channel, and a vertical differentiation channel due to Ronen (1991). We do not find evidence for the information channel and weak evidence for the compliance channel. Quantile treatment effects suggest that, consistent with Ronen (1991), there were quality improvements across the quality spectrum. Our study thus brings the regulatory function of the state under the ambit of experimental methods and shows that even in low-capacity settings, regulations and inspections can improve the quality of care, as measured by compliance with patient safety measures.