Endogenous quality investments in the U.S. hospital market.

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Date: July 2022
Publisher: Elsevier B.V.
Document Type: Report; Brief article
Length: 290 words

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Abstract :

Abstract High and increasing hospital prices could reflect market imperfections, including provider concentration. Yet high prices could also reflect increased willingness to pay by privately insured consumers for clinical and non-clinical quality. In this paper, we explore strategic quality choices where hospitals make quality investments to increase private revenue. We then measure the relationship between potential prices and numerous quality measures including patient satisfaction, hospital processes, risk-adjusted mortality, the revealed preferences of current Medicare patients, technology adoption, physician quality, and ED wait times. We show that across a range of measures quality is correlated with the profitability of the payer mix: hospitals with more potential privately insured patients are of higher quality. Author Affiliation: (a) The Kellogg School of Management, Northwestern University and NBER, 2211 Campus Drive, Evanston, IL 60608, United States (b) Kellogg School of Management, Northwestern University and Analysis Group, Inc., 180 North Stetson Avenue, Suite 2300, Chicago, IL 60601, United States (c) The Kellogg School of Management, Northwestern University and NBER. 2211 Campus Drive, Evanston, IL 60608, United States * Corresponding author. Article History: Received 22 November 2021; Revised 2 May 2022; Accepted 9 May 2022 (footnote)1 This research was performed while Ody worked at Kellogg and reflects the views of the authors and not necessarily the views of Analysis Group. The authors would like to acknowledge the valuable advice, suggestion, and data assistance provided by John Graves, Leonce Nshuti, Adam Sacarny, and Matt Schmitt. We also thank Amitabh Chandra, Stuart Craig, David Cutler, Leemore Dafny, Michael Dickstein, David Dranove, Amy Finkelstein, Melissa Kearney, Kate Ho, Mike Powell, Mark Shepard, Ashley Swanson, Jeroen Swinkels, and the participants of the Chicago Health Economics Summit for useful comments. Byline: Craig Garthwaite (a), Christopher Ody (b), Amanda Starc [amanda.starc@kellogg.northwestern.edu] (*,1,c)

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Gale Document Number: GALE|A709525728