Impact of Mortality-Based Performance Measures on Hospital Pricing: The Case of Colon Cancer Surgeries

32 Pages Posted: 20 Sep 2013

See all articles by Avi Dor

Avi Dor

Case Western Reserve University - Department of Economics; National Bureau of Economic Research (NBER)

Partha Deb

City University of New York, CUNY Hunter College - Department of Economics

Michael Grossman

National Bureau of Economic Research (NBER), NY Office; CUNY The Graduate Center - Department of Economics

Gregory Cooper

University Hospitals Case Medical Center - Division of Gastroenterology and Liver Disease

Siran Koroukian

Case Western Reserve University

Fang Xu

Case Western Reserve University - Department of Gastroenterology

Date Written: September 2013

Abstract

We estimate price regressions for surgical procedures used to treat colon cancer, a leading cause of cancer mortality. Using a claims database for self-insured employers, we focus on transaction prices, rather than more commonly available billing data that do not reflect actual payments made. Although the responsiveness of prices to hospital performance depends on the impact of quality on the slope of the quantity-demand of the payers, which are not known a priory, it is often assumed that higher performing hospitals are able to command higher prices. To test this hypothesis we construct performance rankings, based on hospital excess-mortality and incorporate them into our price models. We are interested in the type information available to large payers who negotiate prices on behalf of their members. To get a cancer-specific index we emulate the widely-reported risk-adjustment methodology used in the federal Hospital Compare reporting system for ranking cardiac performance. The effects were consistently negative in all models (adverse quality reduces price), though not significant. However, we observe a rational pricing structure whereby higher treatment complexity is reflected in higher price differentials, controlling for patient characteristics and market structure.

Suggested Citation

Dor, Avi and Deb, Partha and Grossman, Michael and Cooper, Gregory and Koroukian, Siran and Xu, Fang, Impact of Mortality-Based Performance Measures on Hospital Pricing: The Case of Colon Cancer Surgeries (September 2013). NBER Working Paper No. w19447. Available at SSRN: https://ssrn.com/abstract=2328494

Avi Dor (Contact Author)

Case Western Reserve University - Department of Economics ( email )

Cleveland, OH 44106
United States
216-368-4110 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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Partha Deb

City University of New York, CUNY Hunter College - Department of Economics ( email )

695 Park Avenue
New York, NY 10021
United States

Michael Grossman

National Bureau of Economic Research (NBER), NY Office ( email )

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HOME PAGE: http://mgrossman.ws.gc.cuny.edu

CUNY The Graduate Center - Department of Economics ( email )

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212-817-7959 (Phone)
212-817-1597 (Fax)

HOME PAGE: http://mgrossman.ws.gc.cuny.edu

Gregory Cooper

University Hospitals Case Medical Center - Division of Gastroenterology and Liver Disease ( email )

11100 Euclid Avenue
Cleveland, OH 44106-5066
United States

Siran Koroukian

Case Western Reserve University

No Address Available

Fang Xu

Case Western Reserve University - Department of Gastroenterology ( email )

Cleveland,, OH 44106
United States

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