Hospital report cards: Quality competition and patient selection

TY - JOUR

T1 - Hospital report cards

T2 - Quality competition and patient selection

AU - Chen, Yijuan

AU - Sivey, Peter

N1 - © 2021 Elsevier B.V. This is an author-produced version of the published paper. Uploaded in accordance with the publisher’s self-archiving policy.

PY - 2021/7/1

Y1 - 2021/7/1

N2 - Hospital 'report cards' policies involve governments publishing information about hospital quality. Such policies often aim to improve hospital quality by stimulating competition between hospitals. Previous empirical literature lacks a comprehensive theoretical framework for analysing the effects of report cards. We model a report card policy in a market where two hospitals compete for patients on quality under regulated prices. The report card policy improves the accuracy of the quality signal observed by patients. Hospitals may improve their published quality scores by costly quality improvement or by selecting healthier patients to treat. We show that increasing information through report cards always increases quality and only sometimes induces selection. Report cards are more likely to increase patient welfare when quality scores are well risk-adjusted, where the cost of selecting patients is high, and the cost of increasing quality is low.

AB - Hospital 'report cards' policies involve governments publishing information about hospital quality. Such policies often aim to improve hospital quality by stimulating competition between hospitals. Previous empirical literature lacks a comprehensive theoretical framework for analysing the effects of report cards. We model a report card policy in a market where two hospitals compete for patients on quality under regulated prices. The report card policy improves the accuracy of the quality signal observed by patients. Hospitals may improve their published quality scores by costly quality improvement or by selecting healthier patients to treat. We show that increasing information through report cards always increases quality and only sometimes induces selection. Report cards are more likely to increase patient welfare when quality scores are well risk-adjusted, where the cost of selecting patients is high, and the cost of increasing quality is low.

KW - Competition

KW - Hospitals

KW - Quality

KW - Report cards

UR - http://www.scopus.com/inward/record.url?scp=85112123999&partnerID=8YFLogxK

U2 - 10.1016/j.jhealeco.2021.102484

DO - 10.1016/j.jhealeco.2021.102484

M3 - Article

C2 - 34218041

SN - 0167-6296

VL - 78

JO - Journal of health economics

JF - Journal of health economics

M1 - 102484

ER -