Unbiased Analysis of Today's Healthcare Issues

Quality of care and prices

Written By: Jason Shafrin - Dec• 26•16

There have been a number of studies that have examined how publicly reporting quality ratings (for health plans, physicians, hospitals or other health care providers) affects market share.  Less attention has been paid to the effect of measured quality on health care prices.  A paper by Huang and Hirth (2016) aim to answer just this question.

We use the rollout of the five-star rating of nursing homes to study how private-pay prices respond to quality rating. We find that star rating increases the price differential between top- and bottom-ranked facilities. On average, prices of top-ranked facilities increased by 4.8 to 6.0 percent more than the prices of bottom-ranked facilities. We find stronger price effects in markets that are less concentrated where consumers may have more choices of alternative nursing homes. Our results suggest that with simplified design and when markets are less concentrated, consumers are more responsive to quality reporting.

Setting higher prices at high quality facilities should be seen as a good thing as allowing high-quality providers to raise prices leads to move investment in quality.

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One Comment

  1. Judith Fulton says:

    When considering increasing care options for the disenfranchised, VanderWielen suggested increasing the number of providers in underserved communities by creating free clinics that were manned by volunteer healthcare professional students. This would expose students to client populations they may otherwise not experience and offer opportunities to hone their skills. Tavernier suggested this immersion may lead to these students continuing their practice in these underserved areas. My thoughts are to create grants for students who commit to the volunteer experiences and agree to a specified time of practice in these areas post graduation with some financial incentives. Either start up funds for a practice or repayment of portions of student loans dependent on the length of the agreed upon time dedication to the underserved area. There must also be some form of evaluation by the patient population, and medical community to assure quality care and services.

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