Do Higher-Priced Hospitals Deliver Higher-Quality Care?
We analyze whether receiving care from higher-priced hospitals leads to lower mortality. We overcome selection issues by using an instrumental variable approach which exploits that ambulance companies are quasi-randomly assigned to transport patients and have strong preferences for certain hospitals. Being admitted to a hospital with two standard deviations higher prices raises spending by 52% and lowers mortality by 1 percentage point (35%). However, the relationship between higher prices and lower mortality is only present at hospitals in less concentrated markets. Receiving care from an expensive hospital in a concentrated market increases spending but has no detectable effect on mortality.
This project received financial support from the National Institute on Aging P01-AG019783. The authors acknowledge the assistance of the Health Care Cost Institute (HCCI) and its data contributors, Aetna, Humana, and UnitedHealthcare, in providing the claims data analyzed in this study. We benefited enormously from the excellent research assistance provided by Elodie Chervin. We also received helpful feedback on earlier drafts from Ivan Badinski, Melinda Buntin, Stuart Craig, Leemore Dafny, Martin Gaynor, Craig Garthwaite, and Amanda Starc. All mistakes are our own. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
John A. Graves
Graves acknowledges his primary faculty appointment in the departments of Health Policy and Medicine at Vanderbilt University School of Medicine within Vanderbilt University Medical Center in Nashville, Tennessee.