DP15045 Assessing the Quality of Public Services: Does Hospital Competition Crowd Out the For-Profit Quality Gap?

Author(s): Johannes Kunz, Carol Propper, Kevin Staub, Rainer Winkelmann
Publication Date: July 2020
Keyword(s): A ordable Care Act, Competition, Hospital quality
JEL(s): H51, I1, I11, I18
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15045

We examine variation in hospital quality across ownership, market concentration and membership of a hospital system. We use a measure of quality derived from the penalties imposed on hospitals under the flagship Hospital Readmissions Reduction Program. We employ a novel estimation approach that extracts latent hospital quality from panel data on penalties and addresses the problem of never- or always-penalized hospitals in short panels. Our quality measure correlates strongly across penalized conditions and with other non-incentivized quality metrics. We document a robust and sizable for-profit quality gap, which is largely crowded out by competition, particularly amongst high-quality and system-organized hospitals.