Quality Improvement Spillovers: Evidence From the Hospital Readmissions Reduction Program

Abstract

Quality knowledge spillovers can enhance the total effectiveness of quality improvement initiatives. Whereas prior research has shown limited quality improvement spillovers in manufacturing settings, we study the presence and moderators of quality improvement spillovers in a service setting, specifically hospital inpatient care. Leveraging a national quality improvement regulation, the Hospital Readmissions Reduction Program (HRRP), we employ difference-in-differences models on a nationwide database and find positive quality spillovers in the healthcare sector. Our findings indicate that the implementation of HRRP resulted in a notable decrease in 30-day readmissions among patients with clinical conditions or insurance types that were not targeted by the policy. We also find that task similarity played a positive role in promoting quality spillovers, while a hospital’s operational focus on target patients (i.e., proportion of hospital volume that is targeted by the policy) did not moderate these spillovers. Notably, we observe that hospitals achieved these quality improvements without increasing the intensity of care provided, and that meaningful improvements
in quality were associated with a reduction of up to 3% in hospitalization costs. This paper contributes novel insights into how regulators and policymakers can design narrow public policies and regulations that achieve broader results by exploiting beneficial quality improvement spillovers.

Keywords: Healthcare management, Knowledge spillover, Quality spillover, Public policy, Empirical