The number of neonatal intensive care units (NICUs) in smaller community hospitals increased greatly during the 1980s and 1990s, attracting deliveries away from hospitals with the most sophisticated NICUs. This pattern of ``deregionalization'' has caused concern because previous studies find higher mortality rates for high-risk infants born in hospitals with less sophisticated NICUs relative to those born in hospitals with the highest care level. In this dissertation, I provide causal estimates of the effect of deregionalization on infant health outcomes and treatment intensity.

In Chapter 2, I argue that previous estimates of the relationship between the level of care at a high-risk infant's birth hospital and mortality may be biased by unobserved selection. To estimate a causal relationship, I use an instrumental variable strategy that exploits exogenous variation in distance from a mother's residence to hospitals offering each level of care. My instrumental variable estimates are bounded well below ordinary least squares estimates and are not statistically different from zero. These results suggest that relocating patients to hospitals with the highest level of care prior to delivery may not lead to improved mortality outcomes, because infants currently born in lower level facilities have higher unobserved mortality risk. I also provide suggestive evidence that inter-hospital transfer after birth is one mechanism by which infants born at the lowest levels of care achieve similar outcomes to those born at higher level hospitals.

In Chapter 3, I test whether additional neonatal intensive care supply leads to excess neonatal intensive care utilization. I exploit within hospital-month variation in the number of vacant NICU beds in an infant's birth hospital the day prior to birth as a source of exogenous variation in supply. I find that the effect of empty beds on NICU admission is positive but very small for the highest risk infants as measured by very low birth weight. However, it is larger for infants with birth weights above this threshold. These results suggest that additional supply of neonatal intensive care resources can lead to increased utilization of intensive care for infants above the very low birth weight threshold.