Endogenous Quality Investments in the U.S. Hospital

39 Pages Posted: 9 Dec 2021

See all articles by Craig Garthwaite

Craig Garthwaite

Northwestern University; National Bureau of Economic Research (NBER)

Christopher Ody

Northwestern University

Amanda Starc

Kellogg School of Management, Northweste

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.

Keywords: analysis of health care markets, public and private health insurance

Suggested Citation

Garthwaite, Craig and Ody, Christopher and Starc, Amanda, Endogenous Quality Investments in the U.S. Hospital. Available at SSRN: https://ssrn.com/abstract=3976038 or http://dx.doi.org/10.2139/ssrn.3976038

Craig Garthwaite

Northwestern University ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Christopher Ody

Northwestern University

2001 Sheridan Road
Evanston, IL 60208
United States

Amanda Starc (Contact Author)

Kellogg School of Management, Northweste ( email )

2001 Sheridan Road
Evanston, IL 60208
United States
3303382067 (Phone)

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