Do Good Reports Mean Higher Prices? The Impact of Hospital Compare Ratings on Cardiac Pricing by Avi Dor, William E. Encinosa, Kathleen Carey :: SSRN

December 9, 2016

Previous research found that the initiation of Hospital Compare (HC) quality reporting had little impact on patient outcomes. However little is known about its impact on hospital prices, which may be significant since insurers are positioned to respond to quality information when engaging hospitals in price negotiations. To explore this issue we estimate variants of difference-in-difference models allowing HC impacts to vary by levels of quality scores. We separately examine the effects of the three main scores (heart attack, heart failure, and combined mortalities) on transaction prices of two related cardiac procedures: bypass surgery and angioplasty. States which had mandated reporting systems preceding HC form the control group. Analyzing claims data of privately insured patients, we find that HC exerted downward pressure on prices, which we attribute to competitive pressures. However, hospitals ranked “above average” captured higher prices, thereby offsetting the overall policy effect. We conclude that HC was effective at constraining prices without penalizing high performers.

Source: Do Good Reports Mean Higher Prices? The Impact of Hospital Compare Ratings on Cardiac Pricing by Avi Dor, William E. Encinosa, Kathleen Carey :: SSRN


Do Certificate-of-Need Laws Limit Spending? by Matthew D. Mitchell :: SSRN

December 5, 2016

In 35 states, certificate-of-need (CON) laws in health care restrict the supply of medical services. These regulations require providers hoping to open a new healthcare facility, expand an existing facility, or purchase certain medical equipment such as an MRI machine or a hospital bed to first prove to a regulatory body that their community needs the service in question. The approval process can be time consuming and expensive, and it offers incumbent providers an opportunity to oppose the entrance of new competitors. However, it was originally hoped that these laws would, among other things, reduce healthcare price inflation. In this brief, I review the basic economic theory of a supply restriction like CON, then summarize four decades of empirical research on the effect of CON on healthcare spending. There is no evidence that CON regulations limit healthcare price inflation and little evidence that they reduce healthcare spending. In fact, the balance of evidence suggests that CON laws are associated with higher per-unit costs and higher total healthcare spending.

Source: Do Certificate-of-Need Laws Limit Spending? by Matthew D. Mitchell :: SSRN


Building a More Sustainable U.S. Blood System | RAND

December 4, 2016

Medical advances have dramatically reduced demand for blood, putting financial stress on blood centers.

Although the current U.S. blood system operates efficiently most of the time, there are seasonal shortages and risks of more widespread shortages in the future if the market continues to contract.

Changes in payment policies, improved capacity to handle emergency or surge needs, and investments in new technology would help ensure a safe, sustainable blood supply.

Source: Building a More Sustainable U.S. Blood System | RAND


The Healthcare Openness and Access Project | Mercatus Center

December 3, 2016

The Healthcare Openness and Access Project (HOAP) is a set of tools providing state-by-state measures of the flexibility and discretion that patients and providers have in managing health and health care. In other words, how open are each state’s laws and regulations to institutional variation in the delivery of care, and how much access to varying modes of care does this confer on the state’s patients and providers?

Source: The Healthcare Openness and Access Project | Mercatus Center


The Effect of Certificate of Need Laws on All-Cause Mortality – Bailey – 2016 – Health Services Research – Wiley Online Library

December 2, 2016

Certificate of Need laws have no statistically significant effect on all-cause mortality. Point estimates indicate that if they have any effect, they are more likely to increase mortality than decrease it.

Source: The Effect of Certificate of Need Laws on All-Cause Mortality – Bailey – 2016 – Health Services Research – Wiley Online Library


American Economic Association

December 2, 2016

Choice in public services is controversial. We exploit a reform in the English National Health Service to assess the effect of removing constraints on patient choice. We estimate a demand model that explicitly captures the removal of the choice constraints imposed on patients. We find that, post-removal, patients became more responsive to clinical quality. This led to a modest reduction in mortality and a substantial increase in patient welfare. The elasticity of demand faced by hospitals increased substantially post-reform and we find evidence that hospitals responded to the enhanced incentives by improving quality. This suggests greater choice can raise quality.

Source: American Economic Association


Hospital Competition, Quality, and Expenditures in the U.S. Medicare Population by Carrie Colla, Julie Bynum, Andrea Austin, Jonathan S. Skinner :: SSRN

December 1, 2016

Theoretical models of competition with fixed prices suggest that hospitals should compete by increasing quality of care for diseases with the greatest profitability and demand elasticity. Most empirical evidence regarding hospital competition is limited to heart attacks, which in the U.S. generate positive profit margins but exhibit very low demand elasticity – ambulances usually take patients to the closest (or affiliated) hospital. In this paper, we derive a theoretically appropriate measure of market concentration in a fixed-price model, and use differential travel-time to hospitals in each of the 306 U.S. regional hospital markets to instrument for market concentration. We then estimate the model using risk-adjusted Medicare data for several different population cohorts: heart attacks (low demand elasticity), hip and knee replacements (high demand elasticity) and dementia patients (low demand elasticity, low or negative profitability). First, we find little correlation within hospitals across quality measures. And second, while we replicate the standard result that greater competition leads to higher quality in some (but not all) measures of heart attack quality, we find essentially no association between competition and quality for what should be the most competitive markets – elective hip and knee replacements. Consistent with the model, competition is associated with lower quality care among dementia patients, suggesting that competition could induce hospitals to discourage unprofitable patients.

Source: Hospital Competition, Quality, and Expenditures in the U.S. Medicare Population by Carrie Colla, Julie Bynum, Andrea Austin, Jonathan S. Skinner :: SSRN