How do hospitals respond to input regulation? Evidence from the California nurse staffing mandate

Mandated minimum nurse-to-patient ratios have been the subject of active debate in the U.S. for over twenty years and are under legislative consideration today in several states and at the federal level. This paper uses the 1999 California nurse staffing mandate as an empirical setting to estimate the causal effects of minimum ratios on hospitals. Minimum ratios led to a 58 min increase in nursing time per patient day and 9 percent increase in the wage bill per patient day in the general medical/surgical acute care unit among treated hospitals. Hospitals responded on several margins: increased use of lower-licensed and younger nurses, reduced capacity by 16 beds (14 percent), and increased bed utilization rates by 0.045 points (8 percent). Using administrative data on discharges for acute myocardial infarction (AMI), I find a significant reduction in length of stay (5 percent) and no effect on the 30-day all-cause readmission rate. The null effect on readmissions suggests that length of stay declined not because hospitals were discharging AMI patients "quicker and sicker", rather, AMI patients recovered more quickly due to an improvement in care quality per day.