NBER Publications by John Romley

One of the most important and vexing issues in health care concerns the cost to improve quality. Unfortunately, quality is difficult to measure and potentially confounded with productivity. Rather than relying on clinical or process measures, we infer quality at hospitals in greater Los Angeles from the revealed preference of pneumonia patients. We then decompose the joint contribution of quality and unobserved productivity to hospital costs, relying on heterogeneous tastes among patients for plausibly exogenous quality variation. We find that more productive hospitals provide higher quality, demonstrating that the cost of quality improvement is substantially understated by methods that do not take into account productivity differences. After accounting for these differences, we find that ...