Hospital report cards: Quality competition and patient selection

Area of Science:

• Health economics
• Public policy analysis
• Healthcare management

Background:

• Government policies often use hospital report cards to enhance quality through market competition.
• Existing research lacks a robust theoretical framework for understanding report card impacts.
• Hospitals compete on quality, influenced by patient perceptions and regulated pricing.

Purpose of the Study:

• To develop and analyze a theoretical model of hospital report card policies.
• To examine how report cards affect hospital quality and patient selection strategies.
• To identify conditions under which report cards improve patient welfare.

Main Methods:

• Economic modeling of a duopolistic hospital market.
• Analysis of a report card policy that enhances the accuracy of quality signals.
• Examination of hospital responses including quality investment and patient selection.

Main Results:

• Increased information from report cards consistently leads to higher hospital quality.
• Patient selection by hospitals occurs in some scenarios but is not a universal outcome.
• The likelihood of patient selection depends on factors like risk adjustment accuracy and cost parameters.

Conclusions:

• Report cards are effective in driving quality improvements in competitive hospital markets.
• Patient welfare is enhanced when report cards feature accurate risk adjustment and when patient selection is costly.
• Policy design should consider the trade-offs between quality improvement and potential adverse selection.