Researchers at Northwestern University’s Kellogg School of Management found that hospitals with a greater ability to draw high-paying, privately insured patients offer demonstrably higher-quality services than those whose patient bases were largely publicly insured and thus paid less for those services. Hospitals with higher-paying patients made more investments in quality as a way to differentiate themselves—and to ensure their indispensability in private insurance networks.
The research team examined the demographics of zip codes near hospitals, which allowed them to estimate the share of privately and publicly insured patients the hospital could potentially attract. This helped them estimate the potential prices a given hospital could command for its services. The team then looked for a relationship between those potential prices and various measures of hospital quality. Importantly, while investments in quality would improve care for all patients, it would only lead to higher prices for the privately insured.
The result was a consistent pattern: across all quality measures, higher scores were associated with a higher share of potential private patients. What’s more, the researchers found evidence that hospitals that expect to court more private patients make costly investments in quality.
- How Regulating Hospital Prices Can Impact Patient Care. Kellogs School of Management at Northwestern University. May 10 2021