Events Calendar

Meghan Esson is an Assistant Professor of Finance at the Tippie College of Business. Her presentation is titled, “Private Equity in Public-Provider Markets: Cost Efficiency vs. Cream-Skimming.” 

Abstract: We examine the cost-cutting strategies employed by private equity (PE) firms in markets where public firms also provide services. We use the ambulance industry as a laboratory as price and choice regulation limits other avenues of increasing profitability. We exploit the staggered acquisition of the two largest national private ambulance companies and detailed operations and cost data from all Arizona ambulance operators in a staggered difference-in-differences design to discern whether PE firms enhance profits through operational efficiencies or by selectively serving lower-cost consumers (cream-skimming). We find a 40% increase in profit among PE firms, driven entirely by cream-skimming from fire departments. We identify the specific mechanism of cream-skimming—firing the paramedics required to operate high-cost runs. These runs are then shifted to fire departments. This cream-skimming behavior leads to a 7% increase nationally in fatalities from traffic accidents in areas serviced by PE-owned ambulances. We highlight the complex implications of PE investment in public services, where cost-cutting measures to increase profitability may compromise public health outcomes and public provider balance sheets.

The Research Methods Seminar Series is presented by the Tippie Research Office in collaboration with the departments of Business Analytics, Economics, and Finance.
Each seminar will present a computational or quantitative research method, possibly along with an application of the method, guidelines for use, and/or ethical considerations. After the presentations there will be an opportunity for questions and to provide feedback on the session, share their own research experiences and meet others with similar interests.

This series is a low-pressure, safe place for Tippie faculty and PhD students to learn from each other, share ideas, and seek feedback. We strive to provide a successful introduction to methods, while offering new insights for more experienced researchers. The value of the seminar for all attendees is increased by interdisciplinary participation, so please attend presentations from outside your field.