Hospitals with better quality do better in the market, beating out rivals for market share, a new report suggests.
The study, published by the National Bureau of Economic Research as a working paper, found hospitals with better quality had more of the market and gained more market share than hospitals with lower quality between 2008 and 2010.
The findings, based on an analysis of Medicare patients with heart attacks, heart failure, pneumonia, and hip and knee replacements, suggest that hospitals do compete for consumers based on quality. That competition has the potential to improve overall U.S. healthcare quality, the study suggests.
Tracking and public reporting of hospital quality has grown in recent years, though the information is limited and research suggests that public quality data has little influence over patient choice and marginally more influence on providers. The market has also been flooded with consumer-friendly tools to shop for and compare hospitals. That data can be confusing and critics have challenged the use of certain quality measures.
The new study did not examine how patients—or family or providers—gleaned information on hospital performance. Nonetheless, the results show a clear correlation between quality and market gains.
Quality was more important than convenience, the study found. Patients that landed in the highest-quality hospital traveled farther to get there. And patients with more choice, those not admitted through the emergency room, were more likely to end up in high-quality hospitals. The results come as Medicare is expanding its use of quality reporting, both for consumer choice and to reward or penalize hospitals based on performance.
“We find robust evidence that higher-quality hospitals—as measured by risk-adjusted survival, risk-adjusted readmissions and adherence to well-established clinical practice guidelines—tend to attract greater market share at a point in time and to grow more over time,” wrote authors Amitabh Chandra and Adam Sacarny of Harvard University, Amy Finkelstein of the Massachusetts Institute of Technology, and Chad Syverson of the University of Chicago.
Indicators of market clout are the “signposts of competition,” said Sacarny, a Robert Wood Johnson scholar in health policy research at Harvard.
More competition may also benefit efforts to improve the overall quality of U.S. healthcare, as fewer patients visit hospitals where poor outcomes are more likely, he said. The study found 20% of the gains in heart attack survival between 1996 and 2008 could be attributed to the market share gains of high quality hospitals. That is “about half the magnitude of the survival gains attributed to each of two major breakthroughs in AMI treatment: reperfusion and primary angioplasty,” the authors said.
The study found no link between hospital market share and patient satisfaction, which the authors included as a fourth quality measure.
So how competitive are hospital markets? Hospitals with a 1 percentage point advantage in heart attack survival rates had 17% more of the market than rivals. Hospitals with a 1 percentage point lower rate of readmissions for heart attack patients had 9% more patients. Higher quality hospitals gained market share faster, too.
For policymakers, the research suggests there is potential for consumers to drive demand for high quality, Sacarny said. How much power consumers have is unclear, however, he said.