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The Effect of Performance Standards on Health Care Provider Behavior: Evidence from Kidney Transplantation

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  • Sarah S. Stith
  • Richard A. Hirth

Abstract

Performance standards are designed to ensure a basic level of quality, and through public reporting of firm performance, encourage firms to compete on quality thus allowing the market to determine the optimal level of quality. In markets with substantial excess demand, however, demand effects may be insufficient to induce any change in firm behavior and enforcement may be required to ensure high quality. Even with enforcement, quality still may not improve at underperforming firms if gaming the system is less costly than improving quality. We test whether information alone or with regulatory enforcement improves outcomes or elicits gaming behavior in our study of 266 kidney transplant centers between 2001 and 2012. In a context of excess demand induced by price controls, we show that information alone has no impact and enforcement may actually increase market inefficiencies; firms respond to costly quality requirements, not by improving quality, but by reducing supply, which exacerbates the disequilibrium between supply and demand, and by cream‐skimming, which reduces access to transplantation among sicker patients.

Suggested Citation

  • Sarah S. Stith & Richard A. Hirth, 2016. "The Effect of Performance Standards on Health Care Provider Behavior: Evidence from Kidney Transplantation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 25(4), pages 789-825, December.
    • Handle: RePEc:bla:jemstr:v:25:y:2016:i:4:p:789-825
    DOI: 10.1111/jems.12161
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    References listed on IDEAS

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    Cited by:

    1. Jinyang Chen & Chaoqun Wang, 2023. "“The reputation premium”: does hospital ranking improvement lead to a higher healthcare spending?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 24(5), pages 817-830, July.
    2. Mariétou H. Ouayogodé & Kurt E. Schnier, 2021. "Patient selection in the presence of regulatory oversight based on healthcare report cards of providers: the case of organ transplantation," Health Care Management Science, Springer, vol. 24(1), pages 160-184, March.
    3. Sarah S. Stith, 2018. "Organizational learning-by-doing in liver transplantation," International Journal of Health Economics and Management, Springer, vol. 18(1), pages 25-45, March.
    4. Stith, Sarah S. & Li, Xiaoxue, 2021. "Does increasing access-to-care delay accessing of care? Evidence from kidney transplantation," Economics & Human Biology, Elsevier, vol. 41(C).

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