The Impact of Hospital Advertising on Patient Demand and Health Outcomes

Abstract

Does hospital advertising influence patient choice and health outcomes? We examine more than 220,000 individual patient-level visits over 24 months in Massachusetts to answer this question. We find that patients are positively influenced by hospital advertising; seeing a television advertisement for a given hospital makes a patient more likely to select that hospital. We also observe significant heterogeneity in patient response depending on insurance status, medical conditions, and demographic factors like age, gender, and race. For example, patients with more restrictive forms of insurance are less sensitive to advertisements. Our demand model allows us to study the impact of a ban on hospital advertising, which has been recently considered by policy makers. We find that banning hospital advertising can hurt patient health outcomes through increased hospital readmissions. This is because hospital advertisements drive patients to higher quality hospitals, which tend to advertise more and have lower readmission rates. However, we do not find a significant change in the overall mortality rate.

Keywords: Health Care Management; Hospital Marketing; Advertising; Structural Model; Empirical IO; Demand Estimation; Patient Heterogeneity; Endogeneity; Border Strategy; MPEC

JEL Classification: I11, M37, L31, L52