Hospital report cards: Quality competition and patient selection

Hospital ‘report cards’ policies involve governments publishing information about hospital quality. Such policies often aim to improve hospital quality by stimulating competition between hospitals. Previous empirical literature lacks a comprehensive theoretical framework for analysing the effects of report cards. We model a report card policy in a market where two hospitals compete for patients on quality under regulated prices. The report card policy improves the accuracy of the quality signal observed by patients. Hospitals may improve their published quality scores by costly quality improvement or by selecting healthier patients to treat. We show that increasing information through report cards always increases quality and only sometimes induces selection. Report cards are more likely to increase patient welfare when quality scores are well risk-adjusted, where the cost of selecting patients is high, and the cost of increasing quality is low.     

The effect of report cards on consumer choice in the health insurance market

We test the effect of report cards on consumer choice in the HMO market. Federal employees were provided with report cards on a limited basis in 1995 and then on a widespread basis in 1996. Exploiting this natural experiment, we find that subjective measures of quality and coverage influence plan choices, after controlling for plan premiums, expected out of pocket expenses and service coverages. The effect is stronger within a small sample of new hires compared to a larger sample of existing federal employees. We also find evidence that report cards increase the price elasticity of demand for health insurance.     

Marketing your services

Healthcare managers are debating whether marketing improves their ability to provide services. To reach both short and long range goals, marketing concepts can be useful management tools. Managers who understand the marketing process will be able to interpret their ability to use marketing to increase market share or to obtain greater resources from their governing boards. JAMES R. LEE, JR., is a PH.D. candidate at St. Louis University. He has over 10 years of management experience with the Missouri Department of Mental Health and is familiar with the philosophies of zero-based budgeting and management by objectives.     

Loss function-based evaluation of physician report cards

Report cards classifying physicians into performance tiers are central to health care quality improvement initiatives. Misclassification is a concern since physicians often have small patient panels for standard performance measures. Given that report cards are used for different purposes by different stakeholders, we specify loss functions and evaluate the potential cost of misclassification for physician report card designs. Monte Carlo simulation to explore misclassification risk and cost for four illustrative physician report card designs and three loss functions representing overall misclassification, patient, and pay-for-performance program perspectives. True physician performance is simulated under a beta-binomial model with parameters yielding simulated true scores resembling previously reported estimates. Misclassification risk varied across report card designs. Overall misclassification risk increased with the number of performance tiers for our simulated scenarios. However, the relationship between misclassification cost and number of tiers was inconsistent across the loss functions. The report card with the lowest misclassification cost varied across stakeholders. Within stakeholder, the costs of a two-tier report card with a high or low hurdle (25th and 75th percentile, respectively) varied. Loss functions and report card designs are illustrative and not intended to exhaustively catalog all possibilities. Little guidance exists on misclassification costs from the patient perspective. Misclassification cost depends on how performance information will be used and by whom. Selecting the lowest-cost design for a given stakeholder could maximize the usefulness of physician performance data. Misclassification cost could guide report card design, improving the usefulness of a report card for one stakeholder without disadvantaging others .     

HMOs: responding to bad report cards

Differentiating one health plan from another is becoming increasingly difficult. But a plethora of report cards on plans' performance are now available to help purchasers pick and choose managed care for their members. When a health plan receives a low score--or a score lower than its competitors, be it ever so slight--does it respond appropriately? Are leaders adequately following up to determine the significance of the scoring, rectify the problem--and communicate that to purchasers? Is quality improvement an outcome of publishing report cards? TQL spoke with health plan leaders, healthcare consultants and purchasers to find out what some plans are doing--and what many should be doing.