Skip to main content

Advertisement

SpringerLink
Log in

“The reputation premium”: does hospital ranking improvement lead to a higher healthcare spending?

  • Original Paper
  • Published:
The European Journal of Health Economics Aims and scope Submit manuscript

Abstract

Global health systems have often disclosed hospital quality and performance information via hospital ranking or rating programs over the last 20 years. This study aims to examine the relationship between hospital ranking and healthcare spending. Using the Basic Medical Insurance claims data from a big city in central China and the hospital ranking data from the Fudan Chinese Hospital League Table from 2016 to 2018, this study exploits the variation of hospital reputable ranking across hospitals and periods to employ the difference-in-differences (DiD) design. To alleviate the self-selection bias emerging from inpatients' selection of hospitals and the extrapolation bias emerging from the potential mis-specification of our linear model, we combine the DiD design with the 3-to-1 optimal Mahalanobis metric matching method. This study finds that ceteris paribus one hospital ascending from the Regional Famous Hospital Group to the National Famous Hospital Group significantly increases inpatients' total healthcare costs, reimbursement costs, and out-of-pocket costs by 5.9%, 6.2%, and 4.0%, respectively. Mechanism analysis reveals that it should be attributed more to physician moral hazard than patient willingness-to-pay. Leads and lags (event study) analysis validates our DiD identification framework and shows that the impact materializes slowly but significantly. In the robustness check, we transfer the outcome variables from the log value to the level value and control five digits of ICD-10 for the disease fixed-effects. The results are highly robust.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3

Similar content being viewed by others

Availability of data and material

Unavailable.

Code availability

Available upon request.

Notes

  1. 0.425 = Exp (0.354)-1. As the treatment indicator in our DiD model is a binary variable and the outcomes are all logged values, we have exponentiated all coefficients in our regression results throughout this study. The explanation will not be repeated later.

References

  1. World Health Organization: Global spending on health 2020: weathering the storm. World Health Organization, Geneva (2020)

    Google Scholar 

  2. Wang, J.-Y., Probst, J.C., Stoskopf, C.H., Sanders, J.M., McTigue, J.F.: Information asymmetry and performance tilting in hospitals: a national empirical study. Health Econ. 20, 1487–1506 (2011). https://doi.org/10.1002/hec.1689

    Article  PubMed  Google Scholar 

  3. Pan, J., Qin, X., Hsieh, C.-R.: Is the pro-competition policy an effective solution for China’s public hospital reform? Health Econ. Policy Law. 11, 337–357 (2016). https://doi.org/10.1017/S1744133116000220

    Article  PubMed  Google Scholar 

  4. Smith, P.C., Mossialos, E., Papanicolas, I., Leatherman, S. (eds.): Performance Measurement for Health System Improvement: Experiences. Challenges and Prospects. Cambridge University Press, Cambridge (2010)

    Google Scholar 

  5. Rechel, B., McKee, M., Haas, M., Marchildon, G.P., Bousquet, F., Blümel, M., Geissler, A., van Ginneken, E., Ashton, T., Saunes, I.S., Anell, A., Quentin, W., Saltman, R., Culler, S., Barnes, A., Palm, W., Nolte, E.: Public reporting on quality, waiting times and patient experience in 11 high-income countries. Health Policy 120, 377–383 (2016). https://doi.org/10.1016/j.healthpol.2016.02.008

    Article  PubMed  Google Scholar 

  6. Center for Medicare & Medicaid Services: Hospital Compare. https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/HospitalCompare

  7. CQC: Care Quality Commission. https://www.cqc.org.uk/

  8. The National Health Service: Find Hospital services – NHS. https://www.nhs.uk/Service-Search/other-services/Hospital/LocationSearch/7

  9. Xiong, X., Gao, J., Zhang, B., Lu, J., Luo, L.: Introduction of Chinese hospital ranking method from the aspect of theoretical framework, practical choice and social effect. J. Hosp. Manag. Health Policy. 1, 1–7 (2017)

    Article  Google Scholar 

  10. Hospital Management Institute of Fudan University: Chinese Hospital League Table. http://www.fudanmed.com/institute/news222.aspx

  11. Avdic, D., Moscelli, G., Pilny, A., Sriubaite, I.: Subjective and objective quality and choice of hospital: Evidence from maternal care services in Germany. J. Health Econ. 68, 102229 (2019). https://doi.org/10.1016/j.jhealeco.2019.102229

    Article  PubMed  Google Scholar 

  12. Pope, D.G.: Reacting to rankings: Evidence from “America’s Best Hospitals.” J. Health Econ. 28, 1154–1165 (2009). https://doi.org/10.1016/j.jhealeco.2009.08.006

    Article  PubMed  Google Scholar 

  13. Whaley, C., Brown, T., Robinson, J.: Consumer responses to price transparency alone versus price transparency combined with reference pricing. Am. J. Health Econ. 5, 227–249 (2019). https://doi.org/10.1162/ajhe_a_00118

    Article  Google Scholar 

  14. Sinaiko, A.D., Joynt, K.E., Rosenthal, M.B.: Association between viewing health care price information and choice of health care facility. JAMA Intern. Med. 176, 1868–1870 (2016). https://doi.org/10.1001/jamainternmed.2016.6622

    Article  PubMed  Google Scholar 

  15. Yamana, H., Kodan, M., Ono, S., Morita, K., Matsui, H., Fushimi, K., Imamura, T., Yasunaga, H.: Hospital quality reporting and improvement in quality of care for patients with acute myocardial infarction. BMC Health Serv. Res. 18, 523 (2018). https://doi.org/10.1186/s12913-018-3330-4

    Article  PubMed  PubMed Central  Google Scholar 

  16. Meyers, D.J., Trivedi, A.N., Wilson, I.B., Mor, V., Rahman, M.: Higher medicare advantage star ratings are associated with improvements in patient outcomes: study examines how medicare quality ratings impact patient outcomes for those enrolled in medicare advantage. Health Aff. (Millwood) 40, 243–250 (2021). https://doi.org/10.1377/hlthaff.2020.00845

    Article  PubMed  Google Scholar 

  17. Dranove, D., Kessler, D., McClellan, M., Satterthwaite, M.: Is more information better? the effects of “report cards” on health care providers. J. Polit. Econ. 111, 555–588 (2003). https://doi.org/10.1086/374180

    Article  Google Scholar 

  18. Stith, S.S., Hirth, R.A.: The effect of performance standards on health care provider behavior: evidence from kidney transplantation. J. Econ. Manag. Strategy. 25, 789–825 (2016). https://doi.org/10.1111/jems.12161

    Article  Google Scholar 

  19. McCarthy, I.M., Darden, M.: Supply-side responses to public quality ratings: evidence from medicare advantage. Am. J. Health Econ. 3, 140–164 (2017). https://doi.org/10.1162/AJHE_a_00070

    Article  Google Scholar 

  20. McCarthy, I.M.: Quality disclosure and the timing of insurers’ adjustments: Evidence from medicare advantage. J. Health Econ. 61, 13–26 (2018). https://doi.org/10.1016/j.jhealeco.2018.06.007

    Article  PubMed  Google Scholar 

  21. Dor, A., Encinosa, W., Carey, K.: Hospital performance standards and medical pricing: the impact of information disclosure in cardiac care. J. Econ. Manag. Strategy. 29, 492–515 (2020). https://doi.org/10.1111/jems.12381

    Article  Google Scholar 

  22. Dor, A., Encinosa, W.E., Carey, K.: Medicare’s Hospital compare quality reports appear to have slowed price increases for two major procedures. Health Aff. (Millwood) 34, 71–77 (2015). https://doi.org/10.1377/hlthaff.2014.0263

    Article  PubMed  Google Scholar 

  23. Huang, S.S., Hirth, R.A.: Quality rating and private-prices: Evidence from the nursing home industry. J. Health Econ. 50, 59–70 (2016). https://doi.org/10.1016/j.jhealeco.2016.08.007

    Article  PubMed  Google Scholar 

  24. Osborne, N.H., Nicholas, L.H., Ryan, A.M., Thumma, J.R., Dimick, J.B.: Association of hospital participation in a quality reporting program with surgical outcomes and expenditures for Medicare beneficiaries. JAMA 313, 496–504 (2015). https://doi.org/10.1001/jama.2015.25

    Article  CAS  PubMed  PubMed Central  Google Scholar 

  25. the National Health Commission: China Health Statistics Yearbook 2021. (2022)

  26. National Healthcare Security Administration: Statistical snapshot of the development of the medical insurance system in 2021. http://www.nhsa.gov.cn/art/2022/3/4/art_7_7927.html

  27. Cua, S., Moffatt-Bruce, S., White, S.: Reputation and the best hospital rankings: what does it really mean? Am. J. Med. Qual. 32, 632–637 (2017). https://doi.org/10.1177/1062860617691843

    Article  PubMed  Google Scholar 

  28. Sehgal, A.R.: The role of reputation in U.S. News & World Report’s Rankings of the Top 50 American Hospitals. Ann. Intern. Med. 152, 521–525 (2010). https://doi.org/10.7326/0003-4819-152-8-201004200-00009

    Article  PubMed  Google Scholar 

  29. Imbens, G.W.: Matching methods in practice: three examples. J. Hum. Resour. 50, 373–419 (2015). https://doi.org/10.3368/jhr.50.2.373

    Article  Google Scholar 

  30. Cameron, A.C., Miller, D.L.: A Practitioner’s guide to cluster-robust inference. J. Hum. Resour. 50, 317–372 (2015). https://doi.org/10.3368/jhr.50.2.317

    Article  Google Scholar 

  31. Brown, J.: Quitters never win: the (adverse) incentive effects of competing with superstars. J. Polit. Econ. 119, 982–1013 (2011). https://doi.org/10.1086/663306

    Article  Google Scholar 

  32. Arrow, K.J.: Uncertainty and the welfare economics of medical care. Am. Econ. Rev. 53, 941–973 (1963)

    Google Scholar 

  33. Steigenberger, C., Flatscher-Thoeni, M., Siebert, U., Leiter, A.M.: Determinants of willingness to pay for health services: a systematic review of contingent valuation studies. Eur. J. Health Econ. (2022). https://doi.org/10.1007/s10198-022-01437-x

    Article  PubMed  PubMed Central  Google Scholar 

Download references

Acknowledgements

We would like to thank Prof. Jiechun Gao for granting us permission to use the hospital ranking data from the Fudan Chinese Hospital League Table. We also would like to extend our sincere thanks to Prof. Guoying Lv, Prof. Zhen Li, Prof. Gordon G. Liu, and Dr. Weilun Wu, who provided valuable comments. We also highly acknowledge valuable suggestions and support from Prof. Lin Cai, Prof. Hongwei Hu, Associate Prof. Fei Wang, Dr. Guoquan Shen, MSc. Qihui Lei, and Dr. Yu He. The opinions expressed and arguments employed herein are solely those of the authors and do not necessarily reflect the official views of our organizations and the funder.

Funding

Renmin University of China: the special developing and guiding fund for building world-class universities (disciplines). Project No. 2022035. (By Jinyang Chen).

Author information

Authors and Affiliations

  1. School of Public Administration and Policy, Renmin University of China, No.59 Zhongguancun Avenue, Beijing, 100872, Beijing, P.R. China

    Jinyang Chen

  2. China Center for Health Economic Research, Peking University, No.5 Yiheyuan Road, Beijing, 100871, Beijing, P.R. China

    Jinyang Chen

  3. School of Public Administration, Central China Normal University, No.152 Luoyu Road, Wuhan, 430079, Hubei, P.R. China

    Chaoqun Wang

Authors
  1. Jinyang Chen
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Chaoqun Wang
    View author publications

    You can also search for this author in PubMed Google Scholar

Contributions

JC: Conception and Design; Analysis and interpretation of data; Drafting of the manuscript; Critical revision of the manuscript for important intellectual content; Statistical analysis; Administrative, technical, or material support; Supervision. CW: Acquisition of data; Critical revision of the manuscript for important intellectual content.

Corresponding authors

Correspondence to Jinyang Chen or Chaoqun Wang.

Ethics declarations

Conflict of interest

The authors have no relevant financial or non-financial interests to disclose.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Springer Nature or its licensor holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law.

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Chen, J., Wang, C. “The reputation premium”: does hospital ranking improvement lead to a higher healthcare spending?. Eur J Health Econ 24, 817–830 (2023). https://doi.org/10.1007/s10198-022-01511-4

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10198-022-01511-4

Keywords

JEL Classification

Search

Navigation