Cohort Turnover and Productivity: the July Phenomenon in Teaching Hospitals

We consider the impact of cohort turnover—the planned simultaneous exit of a large number of experienced employees and a similarly sized entry of new workers—on productivity in the context of teaching hospitals. Specifically, we examine the impact of the annual July turnover of residents in American teaching hospitals on levels of resource utilization and quality in teaching hospitals relative to a control group of non-teaching hospitals. We find that, despite the anticipated nature of the cohort turnover and the supervisory structures that exist in teaching hospitals, this annual cohort turnover results in increased resource utilization (i.e., longer length of hospital stay) for both minor and major teaching hospitals, and decreased quality (i.e., higher mortality rates) for major teaching hospitals. Particularly in major teaching hospitals, we find evidence of a gradual trend of decreasing performance that begins several months before the actual cohort turnover and may result from a transition of responsibilities at major teaching hospitals in anticipation of the cohort turnover. ∗ Corresponding author. Email: [email protected]; Address: 435 Morgan Hall, Harvard Business School, Boston, MA 02163. We thank Jay Bhattacharya, David Cutler, Arnold Epstein, William Evans, LeRoi Hicks, Barbara McNeil, Paul Oyer, Douglas Staiger, and seminar participants at the University of Pennsylvania, Harvard Business School, Stanford Graduate School of Business, the 14 Annual Health Economics Conference, the National Bureau of Economic Research’s Summer Institute, the 2013 INFORMS Healthcare Conference, and the 2013 INFORMS Annual Meeting for helpful comments on an earlier version of this manuscript. We also thank Juliana Pakes for information regarding the Charlson Index and Sarah Woolverton for expert coding assistance. We acknowledge financial support from the Division of Research and Faculty Development at the Harvard Business School.