Evaluating Measures of Hospital Quality
In response to unsustainable growth in health care spending, there is enormous interest in reforming the payment system to “pay for quality instead of quantity.” While quality measures are crucial to such reforms, they face major criticisms largely over the potential failure of risk adjustment to overcome endogeneity concerns. In this paper we implement a methodology for estimating the causal relationship between hospital quality measures and patient outcomes. To compare similar patients across hospitals in the same market, we xploit ambulance company preferences as an instrument for patient assignment. We find that a variety of measures used by insurers to measure provider quality are successful: assignment to a higher-scoring hospital results in better patient outcomes. We estimate that a two-standard deviation improvement in a composite quality measure based on existing data collected by CMS is causally associated with reductions in readmissions and mortality of roughly 15%.
We thank Mauricio Caceres for excellent research support, and gratefully acknowledge support from the National Institutes of Health R01 AG041794-01 and R01 AG041794-04. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.