Endogenous quality investments in the U.S. hospital market

Craig Garthwaite, Christopher Ody and Amanda Starc

Journal of Health Economics, 2022, vol. 84, issue C

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.

Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jhecon:v:84:y:2022:i:c:s0167629622000558

DOI: 10.1016/j.jhealeco.2022.102636

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