“The reputation premium”: does hospital ranking improvement lead to a higher healthcare spending?

Jinyang Chen*, Chaoqun Wang*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


Global health systems have often disclosed hospital quality and performance information via hospital ranking or rating programs over the last 20 years. This study aims to examine the relationship between hospital ranking and healthcare spending. Using the Basic Medical Insurance claims data from a big city in central China and the hospital ranking data from the Fudan Chinese Hospital League Table from 2016 to 2018, this study exploits the variation of hospital reputable ranking across hospitals and periods to employ the difference-in-differences (DiD) design. To alleviate the self-selection bias emerging from inpatients' selection of hospitals and the extrapolation bias emerging from the potential mis-specification of our linear model, we combine the DiD design with the 3-to-1 optimal Mahalanobis metric matching method. This study finds that ceteris paribus one hospital ascending from the Regional Famous Hospital Group to the National Famous Hospital Group significantly increases inpatients' total healthcare costs, reimbursement costs, and out-of-pocket costs by 5.9%, 6.2%, and 4.0%, respectively. Mechanism analysis reveals that it should be attributed more to physician moral hazard than patient willingness-to-pay. Leads and lags (event study) analysis validates our DiD identification framework and shows that the impact materializes slowly but significantly. In the robustness check, we transfer the outcome variables from the log value to the level value and control five digits of ICD-10 for the disease fixed-effects. The results are highly robust.

Original languageEnglish
Pages (from-to)817-830
Number of pages14
JournalEuropean Journal of Health Economics
Issue number5
Early online date2 Sept 2022
Publication statusPublished - 1 Jul 2023

Bibliographical note

Funding Information:
Renmin University of China: the special developing and guiding fund for building world-class universities (disciplines). Project No. 2022035. (By Jinyang Chen).

Funding Information:
We would like to thank Prof. Jiechun Gao for granting us permission to use the hospital ranking data from the Fudan Chinese Hospital League Table. We also would like to extend our sincere thanks to Prof. Guoying Lv, Prof. Zhen Li, Prof. Gordon G. Liu, and Dr. Weilun Wu, who provided valuable comments. We also highly acknowledge valuable suggestions and support from Prof. Lin Cai, Prof. Hongwei Hu, Associate Prof. Fei Wang, Dr. Guoquan Shen, MSc. Qihui Lei, and Dr. Yu He. The opinions expressed and arguments employed herein are solely those of the authors and do not necessarily reflect the official views of our organizations and the funder.

Publisher Copyright:
© 2022, The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature.


  • China
  • Healthcare spending
  • Hospital quality transparency
  • Hospital ranking
  • Reputation premium

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