Quality Rankings and Choice of Hospital

Today I review some of the evidence regarding whether quality rankings affect hospital choice. In particular, I focus on a recent article on choice of hospitals in the Netherlands for angioplasties.

Literature Review

I first review some of the previous literature on how quality affects patient choice of hospitals.

• Tay (2003) found changes in hospital quality are predicted to have substantial effects on hospital demand, using Medicare claims data from 1994 for all heart attack patients over 65.
• Howard (2006) used a sample of all patients who had to choose a hospital when registering for the national kidney transplantation waiting list in the period 2000–2002 and also found patients take quality into account when choosing a hospital.
• Goldman and Romley (2008) found that amenities such as good food, attentive staff, and pleasant surroundings increase a hospital’s demand.  These results are estimated using data for Medicare pneumonia patients in the greater Los Angeles market in 2002.
• Mukamel et al. (2004/2005) examined the effect of the first New York State Cardiac Surgery Reports in 1992 on patients’ selection of cardiac surgeons, finding that published quality rankings have an impact on surgeon selection.
• Dranove and Sfekas (2009) used data from New York State in 1989–1991 and determine that when hospital report cards provide information that differs from patients’ beliefs, patient response is to move to higher quality hospitals.
• Pope (2009) used a sample of Medicare patients in California and found that annually published hospital rankings had a significant impact on patient decisions. An improvement within a given hospital’s specialty led to a significant increase in the number of (non-emergent) patients treated and the relevant sector’s revenue.
• Bundorf et al. (2009) examined the effect of providing consumers with quality information in the context of fertility clinics, finding that public reporting of quality significantly affected patients’ choice of clinic.
• Epstein (2010) found that the publication of coronary artery bypass graft (CABG) surgery report cards in 2002 in Pennsylvania did not have a large effect on patient–surgeon sorting.
• Wang et al. (2011). Examining the impact of the same report cards as Epstein, they found a negative effect on the utilization of poor performing and unrated surgeons but no effect on the utilisation of more highly rated surgeons or hospitals of any rating.
• Dranove et al. (2003) have empirically shown that report cards may indeed encourage hospitals to “game” the system by avoiding sick patients or seeking healthy patients. They found that the adoption of mandatory CABG surgery report cards in New York and Pennsylvania in the early 1990s led to substantial risk selection by providers.

Hospital Quality in the Netherlands

Public reporting of comparative information about the quality of Dutch hospitals began in 2005. Since then several indicators of hospital quality have been made publicly accessible on the government-sponsored patient-oriented health care portal www.KiesBeter.nl (literally: “make better choices”).4 Patients can use the website to compare hospitals on different sets of outcome measures developed by the Dutch Health Care Inspectorate (IGZ) in cooperation with stakeholders (hospitals and physicians)

Using data from the Agis Health Database (from private insurer Agis), the authors employ a mixed logit model to identify the effect of hospital quality measures on patient choice of hospitals for angioplasties. This specification is the same as for the standard logit, except that β varies with patients rather than being fixed.

“The authors find that an improvement in overall reputation by one point – given an average score of 7.2 on a scale of 1–10 this change implies an increase of 14 percent – would result in an increase in demand of 65 percent or 92 patients. The variation across individual hospitals is, however, substantial: the predicted increases in demand vary from 18 percent to 230 percent.”

One problem of this study is that they assume that quality is an exogenous factor in terms of its effect on patient choice of hospital. It could be the case, however, that hospitals that are higher quality are better at selecting relatively healthy patients which, thus improves their quality score (as risk adjustment is likely imperfect).

Also, the study does not disentangle whether quality reporting affects choice of hospital. Patients may have higher demand for high quality hospitals due to word-of-mouth knowledge. Thus, public reporting of hospital quality may (or may not) have a small impact on hospital choice.

Sources:

• Marco Varkevisser. Stéphanie A. van der Geest, Frederik T. Schut.   Do patients choose hospitals with high quality ratings? Empirical evidence from the market for angioplasty in the Netherlands.  Journal of Health Economics  Volume 31, Issue 2, March 2012, Pages 371–378.
• M.K. Bundorf, N. Chun, G. Shah Goda, D.P. Kessler. Do markets respond to quality information? The case of fertility clinics. Journal of Health Economics, 28 (3) (2009), pp. 718–727.
• D. Dranove, D. Kessler, M. McClellan, M. Satterthwaite. Is more information better? The effects of report cards on health care providers. Journal of Political Economy, 111 (3) (2003), pp. 555–588
• D. Dranove, A. Sfekas. Start spreading the news: a structural estimate of the effects of New York hospital report cards. Journal of Health Economics, 27 (5) (2009), pp. 1201–1207
• A.J. Epstein. Effects of report cards on referral patterns to cardiac surgeons. Journal of Health Economics, 29 (5) (2010), pp. 718–731.
• Goldman, D., Romley, J.A., 2008. Hospitals as hotels: the role of patient amenities in hospital demand. Working Paper 14619. National Bureau of Economic Research, Cambridge, MA.
• D.H. Howard. Quality and consumer choice in healthcare: evidence from kidney transplant. Topics in Economic Analysis & Policy, 5 (1) (2006), pp. 1–20.
• D.B. Mukamel, D.L. Weimer, J. Zwanziger, S.F. Huang Gorthy, A.I. Muslin. Quality report cards, selection of cardiac surgeons, and racial disparities: a study of the publication of the New York State Cardiac Surgery Reports. Inquiry, 41 (4) (2004/2005), pp. 435–446.
• D.G. Pope. Reacting to rankings: evidence from America’s Best Hospitals. Journal of Health Economics, 28 (6) (2009), pp. 1154–1165.
• Tay. Assessing competition in hospital care markets: the importance of accounting for quality differentiation. RAND Journal of Economics, 34 (4) (2003), pp. 786–814.
• J. Wang, J. Hockenberry, S.Y. Chou, M. Yang. Do bad report cards have consequences? Impacts of publicly reported provider quality information on the CABG market in Pennsylvania. Journal of Health Economics, 30 (2) (2011), pp. 392–407.