Does Hospital Capacity Affect Physicians' TreatmentPattern?

How does hospital capacity influence physicians' treatment pattern? We address this question by examining the impact of empty hospital beds on healthcare delivery for the oldest-old population in Japan. Using universal administrative medical claims data from the Ministry of Health, Labour and Welfare, we exploit a unique natural experiment arising from COVID-19 patients across secondary medical service area (SMAs). This policy provides exogenous variation in hospital capacity, enabling us to implement an instrumental variable approach to identify the causal effects. We find that increased bed availability leads to a significant shift from outpatient to inpatient care, with physicians more likely to hospitalize patients and extend hospital stays. These effects are particularly pronounced in less populated regions and areas with higher medical resources availability. This impact is strongest among the most vulnerable groups: the oldest-old and those of lower socioeconomic status. Our findings reveal how healthcare infrastructure shapes treatment decisions and have significant policy implications for hospital resource allocation, particularly in aging societies with universal healthcare system.