How costly is hospital quality? A revealed-preference approach.
We analyze the cost of quality improvement in hospitals, dealing with two challenges. Hospital quality is multidimensional and hard to measure, while unobserved productivity may influence quality supply. We infer the quality of hospitals in Los Angeles from patient choices. We then incorporate ‘revealed quality’ into a cost function, instrumenting with hospital demand. We find that revealed quality differentiates hospitals, but is not strongly correlated with clinical quality. Revealed quality is quite costly, and tends to increase with hospital productivity. Thus, non-clinical aspects of the hospital experience (perhaps including patient amenities) play important roles in hospital demand, competition, and costs.
University of Southern California, Los Angeles, and the RAND Corporation.
John A
JA
Romley
Dana P
DP
Goldman
D017048:Health Care Costs / Q000266:history; D049673:History, 20th Century; D049674:History, 21st Century; D006761:Hospitals / Q000266:history; D015141:Los Angeles / Q000208:ethnology; D057240:Patient Preference / Q000191:economics / Q000208:ethnology / Q000331:legislation & jurisprudence / Q000523:psychology; D010361:Patients / Q000266:history / Q000331:legislation & jurisprudence / Q000523:psychology; D058996:Quality Improvement / Q000191:economics / Q000266:history; D011787:Quality of Health Care / Q000191:economics / Q000266:history