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Start spreading the news: A structural estimate of the effects of New York hospital report cards

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  • Dranove, David
  • Sfekas, Andrew

Abstract

Research on the effects of publicly reported hospital quality report cards on patient market shares is mixed. Higher-ranking hospitals do not consistently experience increases in market share. We argue that this may be because the report cards do not always convey "news" about quality; in some cases the rankings conform with prior beliefs about quality. We develop a structural model of the "news" in report cards and estimate the model using data from New York State in 1989-1991. We show hospitals with negative news in the original 1990 report cards experienced a decrease in market share, but that a misspecified model might continue to find no report card effect.

Suggested Citation

  • Dranove, David & Sfekas, Andrew, 2008. "Start spreading the news: A structural estimate of the effects of New York hospital report cards," Journal of Health Economics, Elsevier, vol. 27(5), pages 1201-1207, September.
    • Handle: RePEc:eee:jhecon:v:27:y:2008:i:5:p:1201-1207
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    1. David M. Cutler & Robert S. Huckman & Mary Beth Landrum, 2004. "The Role of Information in Medical Markets: An Analysis of Publicly Reported Outcomes in Cardiac Surgery," American Economic Review, American Economic Association, vol. 94(2), pages 342-346, May.
    2. Jin, Ginger Zhe & Sorensen, Alan T., 2006. "Information and consumer choice: The value of publicized health plan ratings," Journal of Health Economics, Elsevier, vol. 25(2), pages 248-275, March.
    3. Friedman, Bernard & Pauly, Mark, 1981. "Cost Functions for a Service Firm with Variable Quality and Stochastic Demand: The Case of Hospitals," The Review of Economics and Statistics, MIT Press, vol. 63(4), pages 620-624, November.
    4. Scanlon, Dennis P. & Chernew, Michael & McLaughlin, Catherine & Solon, Gary, 2002. "The impact of health plan report cards on managed care enrollment," Journal of Health Economics, Elsevier, vol. 21(1), pages 19-41, January.
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