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The Goodman Institute Health Blog

Do Higher Priced Hospitals Deliver Higher Quality Care?

Posted on June 8, 2022 by John C. Goodman

This NBER Working Paper says it depends on whether there is competition.

In markets with more hospital competition, going to higher-priced hospitals raises spending by approximately 53 percent and lowers mortality by 47 percent. By contrast, in concentrated hospital markets receiving care from a high-priced hospital also raises spending by 54 percent, but has no impact on patient outcomes.

And the higher spending in competitive markets is worth it:

Such hospitals spend approximately $1 million per life saved. Assuming that the individuals in the research sample live for another nine years, this is cost effective relative to the Environmental Protection Agency’s $8.7 million benchmark estimate of the value of a statistical life.

Unfortunately, the trend in the overall market is for more concentration and less competition.

1 thought on “Do Higher Priced Hospitals Deliver Higher Quality Care?”

  1. Devon Herrick says:
    June 8, 2022 at 8:47 pm

    I’m reminded of the Gruber/Anthem CALPERS study on reference pricing for joint replacement in California. Anthem identified nearly 50 hospitals that were low priced with similar outcomes as the high-priced hospitals. It instituted a policy where its reference price was $30,000. Any additional costs were borne by the patient. Within a year, the low-priced hospitals had reduced their prices slightly while the high priced hospitals had reduced their priced a lot.

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