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Information and Consumer Choice: The Value of Publicized Health Plan Ratings
Abstract
We use data on the enrollment decisions of federal annuitants to estimate the influence of publicized ratings on health plan choice. We focus on the impact of ratings disseminated by the National Committee for Quality Assurance (NCQA), and use our estimates to calculate the value of the information. Our approach exploits a novel feature of the data-the availability of non-public plan ratings-to correct for a source of bias that is inherent in studies of consumer responsiveness to information on product quality: since publicized ratings are correlated with other quality signals known to consumers (but unobserved by researchers), the estimated influence of ratings is likely to be overstated. We control for this bias by comparing the estimated impact of publicized ratings to the estimated impact of ratings that were never disclosed. The results indicate that NCQA's plan ratings had a meaningful influence on individuals' choices, particularly for individuals choosing a plan for the first time. Although we estimate that a very small fraction of individual decisions were materially affected by the information, for those that were affected the implied utility gains are substantial.
... Around 3% of people switched plans as a result of the release of ratings. Other studies that found significant impacts on selection have generally found relatively modest effects (Beaulieu 2002;Wedig & Tai-Seale 2002;Jin & Sorensen 2006). Several generally earlier studies found no impacts on selection. ...
... Actual switching of plans by consumers is generally very low(Chernew et al. 2008;Scanlon et al. 2002;Jin & Sorensen 2006).Chernew et al. (2008) estimated the implied value on the information provided through the report cards for GM employees to be around $20 per person.Jin & Sorensen (2006) estimated value of quality information provided to Federal employees to be $US3.39 per person. ...
... Actual switching of plans by consumers is generally very low(Chernew et al. 2008;Scanlon et al. 2002;Jin & Sorensen 2006).Chernew et al. (2008) estimated the implied value on the information provided through the report cards for GM employees to be around $20 per person.Jin & Sorensen (2006) estimated value of quality information provided to Federal employees to be $US3.39 per person. ...
The Sax Institute commissioned an evidence-based summary of the effects of public disclosure of performance information on hospital effectiveness, efficiency and patient outcomes. Health Policy Analysis was engaged to undertake this work. The review (a) re-examined in previous reviews with a focus on identifying both efficiency and effectiveness impacts of public release; (b) abstracted and extracted additional information about the nature of public disclosure systems studies; (c) extended the literature search to more recent literature published since the Chen review; and (d) analysed results in terms of underlying public disclosure systems in addition to findings from individual published studies.
... It is also not clear how constraints on consumer choice due to plans, geography, waiting time or clinician choice affect the magnitude of PPR effects. Greater PPR effects in studies of health plans may also reflect greater homogeneity among consumers in plan switching studies because the people involved in the studies have the same employer [15][16][17] or are eligible for the same schemes [18]. However this could be offset by the act that larger more diverse employers are the most likely to offer health plan choice [19]. ...
... Four of the eight studies examined the effect of PPR on health plan selection [15][16][17][18]. Three studies involved selection of employment-based health insurance plans. ...
... Specifically, Beaulieu found that the selection of a particular plan increased by 10% for every unit in the plan's quality rating. Similarly, Wedig and Tai-Seale [16] and Jin and Sorensen [17] found that among federal employees, an increase of one standard deviation in the quality score (i.e. overall quality of care [16] and National Committee for Quality Assurance score [17]) of a plan was associated with 30.9% and 2.6% points increase respectively, in the likelihood of a particular plan being selected. ...
The dissemination of public performance reporting (PPR) cards aims to increase utilisation of information on quality of care by consumers when making health plan choices. However, evaluations of PPR cards show that they have little impact on consumer choices. The aim of this study is to undertake a systematic review and meta-analysis of the impact of PPR cards in promoting health plan selection and switching between health plans by consumers. We searched five online databases and eight previous reviews for studies reporting findings on PPR and health plans. We extracted data and conducted quality assessment, systematic critical synthesis and meta-analyses on the included studies. We identified eight relevant health plan articles related to selection (n = 2), switching (n = 4), selection/switching (n = 2). Meta-analyses showed that PPR was associated with an improvement in health plan selection and a very small deterioration in switching health plans though these changes were not statistically significant. Differences were observed between employer-sponsored health insurance and Medicare/Medicaid insurance. Given the small number of studies included in the review, further research examining the impact of PPR on health plan selection and switching in a range of insurance markets is required.
... Specifically, for each subsample, a conditional logit model 5 is estimated using the following utility function for vehicle i, with observations weighted by survey weights: The utility of choosing a vehicle is thus dependent on the total cost of ownership (price minus resale value plus fuel costs), vehicle characteristics, and "popularity" term as denoted by ln(S i /S avg ), which accounts for spillover effects (He and Oppewal, 2018;Jin and Sorensen, 2006;Tucker and Zhang, 2011). The incorporation of previous year sales also accounts for unobserved product characteristics (Epstein, 2010;Jin and Sorensen, 2006). ...
... Specifically, for each subsample, a conditional logit model 5 is estimated using the following utility function for vehicle i, with observations weighted by survey weights: The utility of choosing a vehicle is thus dependent on the total cost of ownership (price minus resale value plus fuel costs), vehicle characteristics, and "popularity" term as denoted by ln(S i /S avg ), which accounts for spillover effects (He and Oppewal, 2018;Jin and Sorensen, 2006;Tucker and Zhang, 2011). The incorporation of previous year sales also accounts for unobserved product characteristics (Epstein, 2010;Jin and Sorensen, 2006). Refueling costs are calculated using the vehicle"s fuel consumption rate, consumer VKT, and assuming a fuel cost of $0.70 per liter, and a vehicle holding period of 7.5 years. ...
Subsidies for promoting plug-in electric vehicle (PEV) adoption are a key component of China's overall plan for reducing local air pollution and greenhouse gas emissions from the light-duty vehicle sector. In this paper, we explore the impact and cost-effectiveness of the Chinese PEV subsidy program. In particular, a vehicle choice model is estimated using a large random sample of individual level, model year 2017 Chinese new vehicle purchases. The choice model is then used to predict PEV market share under alternative policies. Simulation results suggest that the 2.5% PEV market share of Chinese new vehicle sales in 2017 resulted in China's new vehicle fleet fuel economy improving by roughly 2%, reducing total gasoline consumption by 6.66 billion liters. However, the current PEV subsidy in China is expensive, costing 13,758 versus $24,506). This would allow for greater PEV adoption (3.11% versus 2.47% market share) for the same budget. In terms of the impact of the recently announced subsidy reduction, results suggest that the PEV market share in China would have declined by 21% had the subsidy been halved without any countervailing measures. Using the same reduced budget, had zero PEV subsidies been given to high-income consumers and higher subsidies been given to low-income consumers, the PEV market share would have declined by only 8%.
... Third-party Reviews Luca (2011) Effect of online consumer reviews on the restaurant demand is examined and it was reported that if increase of one star in online ratings led to an approximate increase of 5-9 percent in the overall restaurant revenue. Jin and Sorensen (2006) Positive effects of publicized health plan ratings on the individual's choice of health plan is found and results were more significant for first-timers. Varkevisser et al. (2012) Choice of hospitals is positively affected by the publicly available quality ratings i.e. hospitals with good reputation are more often chosen. ...
... Kimmel and Kitchen (2014) suggested that low ratings have more significant impact on customers' responses compared to high ratings. Researchers following the hedonic approach suggested that third-party reviews complement the effect of marketing cues on customers' perceived quality (Jin and Sorensen, 2006;Luca, 2011). Another research found that the positive effect of marketing cues on the perceived quality decline with third-party reviews (Basuroy et al., 2006). ...
The uncertainty about product quality has increased in online settings, and consumers' often use multiple product cues to assess product quality. The authors have tested the simultaneous effects of multiple product cues in Pay-what-you-want (PWYW) online settings. PWYW lacks posted prices and allows buyers to decide the prices. This paper investigates how consumers process multiple cues of varying diagnostic nature simultaneously and form product quality perceptions. Specifically, study 1 examines the interactions among seller reputation, online product presentation, and external reference price and study 2 examines the interaction effect of third-party reviews and online product presentation and the external reference price. The results add to the theoretical domain by suggesting that consumers' online cue processing behaviour is much more complicated than previously presented in the literature.
... 5 Not many existing papers explicitly study the role of quality information in the decision to choose health plans. Scanlon et al. (2002) and Chernew et al. (2008) study the impact of quality report cards using US data from General Motors; Beaulieu (2002), Wedig and Tai-Seale (2002), Dafny and Dranove (2008), Jin and Sorensen (2006), and Abraham et al. (2006) study health plan ratings in "natural" US settings, whereas Harris (2002) conduct a discrete choice experiment in West Los Angeles to conclude that large quality differences would be required for consumers to accept provider access restrictions. Kolstad (2013) studies the impact of quality report cards for cardiac surgery on surgeon's behavior. ...
... Next, we exploit discrete choice methods to model health plan choice determinants (c.f. Beaulieu, 2002;Wedig and Tai-Seale, 2002;Jin and Sorensen, 2006;Dafny and Dranove, 2008). We use the random parameters model (RPL), also called mixed logit model, which is a generalization of the conditional logit model. ...
This paper links representative enrollee panel data to health plan data on (i) prices, (ii) service quality , and (iii) non-essential benefits for the German statutory multi-payer market and the years 2007 to 2010. We first show that, although heavy federal regulation ensures a simple choice architecture, the majority of health plans are dominated--even when considering four non-price attributes. Enrollees in dominated plans are older, less educated, and unhealthier. Second, we assess how switchers value prices relative to non-price health plan attributes. Our mixed logit models incorporate a total of 1,700 health plan choices with each more than 50 choice sets. While prices are an important determinant for nearly everyone, 40% of all switchers do not seem to value service quality and supplemental benefits when choosing health plans.
... 5 Not many existing articles explicitly study the role of quality information in the decision to choose health plans. Scanlon et al. (2002) and Chernew, Gowrisankaran, and Scanlon (2008) study the impact of quality report cards using U.S. data from General Motors; Beaulieu (2002), Wedig and Tai-Seale (2002), Jin and Sorensen (2006), Abraham et al. (2006), and Dafny and Dranove (2008) study health plan ratings in "natural" U.S. settings, whereas Harris (2002) conduct a discrete choice experiment in West Los Angeles to conclude that large quality differences would be required for consumers to accept provider access restrictions. Kolstad (2013) studies the impact of quality report cards for cardiac surgery on surgeon's behavior. ...
... Next, we exploit discrete choice methods to model health plan choice determinants (Beaulieu, 2002;Wedig and Tai-Seale, 2002;Jin and Sorensen, 2006;Dafny and Dranove, 2008). We use the random parameters model (RPL), also called mixed logit model, which is a generalization of the conditional logit model. ...
... Kolstad's 2009 article [27] is the seminal citing work, addressing quality and consumer decision-making in healthcare. Leading cited articles include Payne et al., [28] Green & Srinivasan, [29] and Jin & Sorenson, [30] focusing on decision-making in the healthcare sector. ...
... Although such realized utility, as reported in guest reviews, has only occurred to a tiny fraction of Airbnb stays, a fully informed guest should expect the realized utility when she chooses where to stay. As documented by Jin and Sorensen (2006); Allcott (2011); Train (2015); Reimers and Waldfogel (2021), the difference between realized and perceived utility is essential for evaluating how consumer surplus changes under different information regimes. ...
... In addition, mortality data factor into publicly reported rankings of healthcare institutions [9][10][11][12]. Publicly reported rankings affect the financial stability of healthcare organizations and can have ramifications for patient care [13][14][15][16]. The mortality index (MI) is an example of a standardized quality metric related to mortality. ...
Background: The mortality index is a quality metric that measures the ratio of observed mortality to expected mortality among inpatients. Expected mortality is a probability calculation based on documentation of patient risks and comorbidities. A mortality index of <1.0 represents fewer patients dying while admitted to the hospital than expected. We aimed to decrease the mortality index in our department by 10% in 6 months. Methods: We formed a multidisciplinary team from Gynecologic Oncology, Health Information Management, Office of Performance Improvement, Revenue Operations, Coding and Institutional Compliance. We educated providers on documentation of patient comorbidities, standardized documentation templates, focused coder analysis and in-depth review and discussion as a department of all inpatient deaths. Pre-intervention 8/2017-7/2018 and post-intervention 11/2018-2/2020 outcomes were compared using the Mann Whitney U test. Results: The median mortality index decreased by 44% from 0.84 to 0.47 (p = 0.03). The median expected mortality increased by 37% from 2.94 to 4.02 (p = 0.002). The median number of inpatient deaths, or observed mortalities, was unchanged though there was a non-significant decreasing trend. Conclusions: Inpatient mortality index is an important quality metric that can be improved through education, standardized documentation, focused review and discussion of all inpatient mortalities.
... 2 Theory: How Prizes Can Affect Consumer Welfare To describe the potential welfare effects of literary prizes, we follow Jin and Sorensen [2006], Allcott [2011], Train [2015], and Reimers and Waldfogel [2021] and distinguish between ex ante expected utility, or decision utility following Kahneman [1994], and ex post experienced utility. ...
We study how experts influence consumer welfare by focusing on the Booker Prize, a prestigious literary prize bestowed annually by professionals. Leveraging the discontinuity created when the prize is awarded, we show that consumers receive the experts’ signal and are influenced to purchase Booker Prize-winning books. However, these consumers experience lower satisfaction due to a misalignment between their tastes and that of the expert jury. Calibrating a structural model of demand, we find that the prize reduces consumer surplus by $70,039 annually; at the individual level, this translates to a surplus loss of 8% of the book's average price.
... per year). In contrast to Jin and Sorensen (2006), Chernew, Gowrisankaran, and Scanlon (2008) specied a Bayesian learning model to quantify the value of information. They assume patients hold priors about the distribution of quality and update to form a posterior proportional to the prior times the likelihood. ...
This dissertation is comprised of essays on the role of information in health economics. In the first chapter, I study quality ratings. Ratings provide consumers with useful quality information, however, when ratings shift demand to highly-rated sellers, congestion might occur at the top of the quality distribution. Congestion caused by disclosure may be observed in the health care setting, where prices often cannot adjust to reflect varying quality. I study the trade-off between providing quality information for consumers and congestion using a star rating disclosure policy implemented at a large integrated health system in the United States, which requires every physician to have star ratings posted online in a standardized fashion. I identify the effects of physician star ratings on patient volume using a regression discontinuity and difference-in-discontinuity design which leverages the rounding of ratings to discrete values and the fact that I observe ratings before and after their public disclosure online. I find that an increase in a physician's rating increases the number of new patients seen by 2.96 visits per month on a baseline of 5.48 (54% increase). I show that star ratings shift patients to physicians who more often provide medically recommended screenings, counseling, and vaccinations. However, I also show that a higher rating causes patients to wait longer for treatment. New patients wait 2.7 additional days (30.5% longer) for an additional increment of the rating scale and existing patients wait longer as well. I use these findings to compute a revealed-preference estimate of the "shadow price of a star"; I find that patients are willing to wait 3 additional days in exchange for a one standard deviation increase in physician ratings. In the absence of a price, wait times may serve as an equilibrating factor to clear the market. In the second chapter, I study surprise medical bills. I introduce a model of final-offer arbitration over these bills between insurers and providers which highlights the tradeoffs for firms and policymakers.
... Notably, using contact tracing information to evaluate whether the "state" of the overall environment is safe from COVID-19 distinguishes this study from previous literature on the effect of market information about product quality, such as nutrition information signaling through food labels (Cawley et al., 2020;Gao & Schroeder, 2009;Kariuki & Hoffmann, 2021;Zhu et al., 2016), health insurance quality (Beaulieu, 2002;Dranove & Jin, 2010;Jin & Sorensen, 2006), sending children's school test scores to parents (Hastings & Weinstein, 2008), and signals sent by financial markets (Dellavigna & Pollet, 2009). In this respect, this analysis is closer to Kapoor and Magesan's (2014), which explores the effects of public information provision on pedestrian countdown signals. ...
Food markets around the world have been disrupted by the COVID‐19 pandemic via consumer behavior upended by fear of infection. In this article, we examine the impact of disclosing COVID‐19 contact tracing information on food markets, using the restaurant industry in China as a case study. By analyzing transaction data at 87 restaurants across 10 cities, we estimate difference‐in‐difference (DID) models to ascertain the impact of COVID‐19 infections and contact information tracing on economic activity as measured by a daily number of transactions. Empirical results show that while the overall number of new COVID‐19 infections at the national level caused a dramatic drop in numbers of transactions in all restaurants, restaurants in cities that disclosed contact tracing information of COVID‐19 infections experienced a 23%–35% higher number of transactions than the ones in cities that did not disclose such information during the recovery period. Ultimately, we show that in the absence of a shelter‐in‐place mandate, disclosing contract tracing information to mitigate consumers’ uncertainties about risks of being infected can contribute to a faster recovery of food markets, in addition to reducing COVID‐19 infections.
... Meanwhile, the WHS designation also motivates local administrations to improve their property quality to gain that name, resulting in a tourism quality-raising effect of a WHS. These rationales are also consistent with the theory regarding quality disclosure and certifications (Dranove & Jin, 2010), and with empirical evidence from health care (Dafny & Dranove, 2008;Jin & Sorensen, 2006;Xiao, 2010), education (Hastings & Weinstein, 2008), restaurants (Jin & Leslie, 2003), as well as tourism industries (Gao et al., , 2022Jiang et al., 2014;Martin-Fuentes, 2016;Yang & Cai, 2016). ...
World Heritage Site (WHS) inscription has been considered as a certification of tourism quality since it is designated to properties with outstanding universal value. While it is hypothesised that the title can raise tourism attractiveness through signalling tourism quality, empirical evidence remains highly mixed. This paper tries to identify the causal effect by using unique daily city-pair tourist flow intensities from Tencent migration big data on two Chinese national holidays between 2015 and 2019 and constructing multi-dimensional fixed effects panel data models. We find that the WHS inscription does raise city tourism attractiveness. One WHS increases tourist inflow intensity by at least 6.7% up to around 10%. The tourism-enhancing effect is consistent under many robustness checks and displays some notable heterogeneity effects in terms of holiday types, days within each holiday and high-speed rail connections. These results suggest that WHS inscription could be a valid tourism quality signal used by tourism administrations to enhance city tourism attractiveness.
... However, Cutler et al. [28] showed that hospitals with bad scores had decreasing demand by patients in comparison to other hospitals. Jin and Sorenson [29] found that ratings of health insurance plans had substantial impact on consumers' choice. Dranove and Sfekas [30] presented a stylized model incorporating the idea of prior beliefs, showing that the strategy had significant impact only in case report cards differ from patients' prior beliefs. ...
Health services are highly regulated and targeted for in-depth inspections by government officials in major part of the countries, aiming at the protection of patients from malpractice. In Brazil, the inspection of regulated professions costs approximately 3.3 billion reais (630 million US dollars) annually. Despite the substantial costs, there is lack of evidence on the quality of the public expenditures on regulation of health services. The Brazilian legal framework poses additional challenges to account for policy effectiveness, since professional regulatory bodies may adopt its own inspection strategy. A methodological alternative to deal with the complexity of public policies refers to the adoption of complex systems approach, considering the interaction between agents, the influence of diverse factors, and the possibility of emergence of patterns from bottom-up. Thus, the objective of the study was to present an agent-based model to investigate two inspection strategies applied to health services: one strategy omits inspection scores from patients, whilst the other discloses the inspection scores. The results of the interactions between patients and clinics under different inspection strategies through computational simulation showed that transparency in inspection scores had no significant impact neither on patients' health nor on clinics’ compliance rate. Conclusions drawn in the light of public policy effectiveness indicate the possibility of adaptation of the model to other regulatory environments.
... Mathios [38] provides evidence in the food sector, while Bennear and Olmstead [39] provide evidence relating to drinking-water suppliers). In the healthcare sector, consistent with the theoretical evidence mentioned above, the empirical evidence demonstrates that consumers have different receptiveness to mandatory quality reports [40][41][42], implying the effect on quality provision may vary depending on consumers' responsiveness. ...
Economic incentives in the context of a particular type of market failure—asymmetric information (which takes place when quality information relating to treatment is not available to patients before purchasing the treatment)—are highly relevant to the understanding of the lack of clinics’ incentives to disclose reliable evidence (relating to treatment quality) in the practice of evidence-based medicine. Based on the case study of the UK in vitro fertilisation (IVF) sector, I show that inadequate quality provision (relating to treatment effectiveness and safety) can be associated with a lack of voluntary disclosure of reliable evidence in the practice of evidence-based medicine. In the absence of sufficient economic incentives on clinics to voluntarily acquire and disclose evidence, I discuss the rationale for legislation requiring mandatory evidence disclosure as a possible mechanism to facilitate the acquisition and revelation of evidence. I do so by drawing evidence from the economic literature relating to the impact of such legislation on firms’ quality improvement. Practical implications for implementation are discussed (and illustrated with examples in the context of the UK IVF sector) with the purpose to facilitate the role of regulators in setting the standards for evidence disclosure to improve interpretability of such evidence, together with the role of patients in engaging with clinics and verifying such evidence to improve its reliability and, ultimately, quality of care.
... Meanwhile, the WHS designation also motivates local administrations to improve their property quality to gain that name, resulting in a tourism quality-raising effect of a WHS. These rationales are also consistent with the theory regarding quality disclosure and certifications (Dranove & Jin, 2010), and with empirical evidence from health care (Dafny & Dranove, 2008;Jin & Sorensen, 2006;Xiao, 2010), education (Hastings & Weinstein, 2008), restaurants (Jin & Leslie, 2003), as well as tourism industries (Gao et al., , 2022Jiang et al., 2014;Martin-Fuentes, 2016;Yang & Cai, 2016). ...
This paper contributes to providing causal evidence on the effect of World Heritage Site (WHS) inscription on city tourism attractiveness, which is still highly elusive in the existing literature. To identify the causal effect, it uses unique daily city-pair tourist flows from Tencent migration big data on two Chinese national holidays between 2015 and 2019. We document that WHS inscription does raise city tourism attractiveness. One more WHS leads to an increase in the tourist inflow intensity by at least 6.7% up to around 10%. The tourism-enhancing effect is consistent under many robustness checks and displays some notable heterogeneity effects in terms of holiday types, days within each holiday, high-speed rail connection, and newly-inscribed WHS cities.
... Boonen et al. (2016) examined the propensity of consumers to switch health insurance companies based on price, information seeking preferences, and consumer attributes. Other studies have investigated out-of-pocket expenses and prices (Buchmueller et al., 2013;Strombom et al., 2002), quality (Dafny & Dranove, 2008;Scanlon et al., 2002), and information (Jin & Sorensen, 2006;Kolstad & Chernew, 2009). Age, gender, current health status, and education have been investigated as well (Boonen et al., 2016;Wuppermann et al., 2014). ...
Health insurance companies have an interest in understanding what factors may lead to positive word-of-mouth (WOM) from consumers. This research identifies factors that influence positive WOM about health insurance firms. Using data collected from 425 insurance policy holders, we find influential factors vary depending on the purchase source. Significant factors identified in the study that influence positive word-of-mouth include service quality, plan satisfaction, and plan type (individual vs. family). Further, claim count, preferred information source, and deductible levels also affect the spread of positive WOM differently among purchase sources. The study concludes with a discussion of implications and future research.
... In addition, mortality data factor into publicly reported rankings of healthcare institutions [9][10][11][12]. Publicly reported rankings affect the financial stability of healthcare organizations and can have ramifications for patient care [13][14][15][16]. The mortality index (MI) is an example of a standardized quality metric related to mortality. ...
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Background: The mortality index (MI) is a quality metric that measures the ratio of actual mortality to expected mortality among inpatients. Expected mortality is a probability calculation based on patient risks and comorbidities. A MI of < 1.0 represents that fewer patients die while admitted to the hospital than expected. Methods: We formed a multidisciplinary team that included Gynecologic Oncology (GO), Health Information Management, Clinical Informatics, Revenue Operations, Coding and Institutional Compliance experts. Our aim was to decrease the GO MI by 10% within a year. Quality Improvement Assessment Board approval was obtained. GO clinical providers were educated on proper documentation of patient comorbidities and severity of illness. Audits of the documentation were performed by the multidisciplinary team. GO patients perceived at high-risk of inpatient mortality were identified for additional review. All GO inpatient deaths were reviewed at the monthly GO Morbidity and Mortality conference and opportunities for avoidance of inpatient death were discussed. Plan-Do-Study-Act (PDSA) cycles were repeated with adjustments made to the review and education processes. Baseline (BL) 8/2017-7/2018 and interim post-intervention (PI) 11/2018-2/2019 outcomes were compared using the Mann Whitney U test. Results: The BL median number of inpatient deaths per month was 2 (range 0-7), with a median expected mortality of 2.96 (range 1.46-5.11), and a median MI of 0.84 (range 0-1.37). The PI median number of inpatient deaths per month was 2.5 (range 2-5), with a median expected mortality of 4.24 (range 3.77-5.06), and a median MI of 0.56 (range 0.53-1.27). The number of inpatient deaths per month was similar between groups (2 vs 2.5; p = 0.49) but the expected mortality increased from to 2.96 to 4.24 (p = 0.03). MI decreased by 33% between BL and PI (0.84 vs 0.56). Conclusions: Inpatient mortality is an important quality metric. Accurate measurement of expected mortality is critical and requires proper documentation. This can be improved through education, review and frequent assessment by PDSA cycles. Our preliminary results show improvement in accurate documentation and measurement of expected mortality resulting in a decrease in MI.
... One such strategy is to rely on the public disclosure of oversight activities as a way to complement public enforcement with market monitoring (Djankov et al. 2003). The available evidence is restricted to a few papers in economics examining contexts outside of capital markets, including healthcare management organizations (Jin and Sorensen 2006;Dafny and Dranove 2008), schools (Hastings and Weinstein 2008), and restaurants (Jin and Leslie 2003). These studies typically rely on the argument that disclosure of oversight activities can mitigate information asymmetries between organizations and consumers. ...
This paper studies the effect of the public disclosure of the Securities and Exchange Commission (SEC) comment-letter reviews (CLs) on firms’ financial reporting. We exploit a major change in the SEC’s disclosure policy: in 2004, the SEC decided to make its CLs publicly available. Using a novel dataset of CLs, we analyze the capital-market responses to firms’ quarterly earnings releases following CLs conducted before and after the policy change. We find that these responses increase significantly after the policy change. These stronger responses partly occur while the review is ongoing and persist on average for two years. Corroborating these results, we also document a set of changes that firms make to their accounting reports following CLs. Our results indicate that disclosure of regulatory oversight activities can strengthen public enforcement.
... In the SHI family 7 This result also holds generally for the choice of health insurance plans with higher reported ratings. See, e.g., Bünnings et al. (2017); Jin and Sorensen (2006); Chernew et al. (2008); Beaulieu (2002); Wedig and Tai-Seale (2002); Scanlon et al. (2002). insurance nonworking spouses and dependent children under 25 years are covered free of charge. ...
We study patient choice of healthcare provider based on both objective and subjective quality measures in the context of maternal care hospital services in Germany. Objective measures are obtained from publicly reported clinical indicators, while subjective measures are based on satisfaction scores from a large and nationwide patient survey. We merge both quality metrics to detailed hospital discharge records and quantify the additional distance expectant mothers are willing to travel to give birth in maternity clinics with higher reported quality. Our results reveal that patients are on average willing to travel between 0.7-4.2 additional kilometres for a one standard deviation increase in reported quality. Furthermore, patients respond independently to both objective and subjective quality measures, suggesting that satisfaction scores may constitute
important complements to clinical indicators when choosing healthcare provider.
This paper studies government and private advertising in market-based public programs. In a model of advertising, we first examine when government advertising increases welfare. Then, we estimate the effects of advertising on consumer demand and assess their welfare effects in the Affordable Care Act health insurance marketplaces. We find government advertising increases overall enrollment and enhances welfare. By contrast, the market expansion effect of private advertising is modest at most. Although private advertising increases demand for insurers in certain specifications, it is not a very efficient tool to induce consumers to select insurers with better plans due to rent-seeking competition. (JEL G22, G52, H51, I13, M37)
We use clinical data on more than 240,000 surgeries and quasi-experimental methods to examine how physicians respond to the surprise release of a performance “report card.” Such feedback interventions are commonly used to encourage physicians to improve performance yet show limited evidence of success. Our results show that these limited effects mask heterogeneous behavioral responses to feedback valence. In particular, physicians improve more from positive feedback than from negative feedback, with negative feedback even reducing performance for a nontrivial share of patients. Experiments with laypersons replicate these results and show that struggles with negative feedback can be mitigated by giving incentives directly tied to improvement and by adding qualitative information that helps individuals interpret past performance. These results are consistent with behavioral models that suggest cognitive and emotional difficulties limit how well individuals use negative feedback. Thus, feedback interventions in healthcare should be carefully designed to mitigate these counterproductive behavioral responses.
This paper was accepted by Ranjani Krishnan, accounting.
Funding: We acknowledge generous funding provided by Tilburg University and the University of Massachusetts Amherst to run the laboratory experiments.
Supplemental Material: The online appendices and data files are available at https://doi.org/10.1287/mnsc.2023.01340 .
Vehicle crash tests mitigate an informational market failure and provide substantial benefits to consumers. Consumers cannot accurately assess vehicle safety leading automakers to provide it suboptimally. Crash tests performed by the Insurance Institute for Highway Safety represent an attempt to mitigate this market failure. This paper presents evidence that automakers responded by producing safer vehicles and that consumers increased purchases of highly rated vehicles. A novel identification strategy using the year of vehicle redesign is used to evaluate the tests' safety impact. A lower‐bound estimate of program benefits is $3000 per vehicle resulting in an annual reduction of 1650 fatalities.
Digitization has led to many new creative products, straining the capacity of professional critics and consumers. Yet, the digitization of retailing has also delivered new crowd-based sources of pre-purchase information. We compare the relative impacts of professional critics and crowd-based Amazon star ratings on consumer welfare in book publishing. Using various fixed effects and discontinuity-based empirical strategies, we estimate their causal impacts on sales. We use these causal estimates to calibrate a structural demand model. The aggregate effect of star ratings on consumer surplus is, in our baseline estimates, more than ten times the effect of traditional review outlets. (JEL D83, L15, L81, L82)
Regulators use ratings to inform consumers about firms and products across a range of industries, but little is known about what consumers learn from such ratings. We propose and directly study two pathways through which consumers form beliefs about products and firms based on these ratings: inference about the absolute implications of a rating (e.g., does a good rating mean a firm is of high quality?) and inference about the relative implications of a rating (e.g., do few firms have a rating this good?). In the context of restaurant hygiene ratings, we find that consumers form incorrect beliefs along both pathways and that their mis-calibrated beliefs are strongly related to their willingness to pay for a restaurant meal. We also find that their misperceptions can be partially reduced with informational interventions that impact their willingness to pay as well.
This study used a sequential explanatory equal-status mixed-method design to investigate whether Maryland’s child care tiered reimbursement system incentivized child care centers to be rated at least 3 (and receive an incentive payment) on Maryland’s 5-level Quality Rating and Improvement System (QRIS). The first stage of research consisted of multilevel logistic regressions to determine the association between centers’ reliance on child care subsidy payments and whether the center had a rating of 3 or higher. Reliance on subsidy payments was defined as the percentage of licensed slots filled by children receiving a child care subsidy. State administrative data on 1003 centers that received a subsidy payment in January 2018 were combined with demographic data from the U.S. Census. The second stage of research consisted of 14 interviews with center directors to understand how they made decisions about which QRIS rating to attain and how tiered reimbursements factored into their decisions. Results from the quantitative research showed that a greater subsidy density was associated with a greater likelihood of a center being rated 3 and receiving an incentive payment. However, results from the qualitative research showed that few center directors reported that tiered payments factored into their decision on what QRIS rating to reach and no directors were singularly motivated by the incentives. Rather, directors reported being intrinsically motivated to improve QRIS ratings or motivated by technical assistance providers. Additionally, directors who did not attain a rating of 3 experienced capacity challenges. Policy implications are discussed.
This article takes advantage of the designation of top tourist cities in China to estimate the impact of quality disclosure on the city tourism economy. According to theories regarding quality disclosure and certification, we develop a tourism promotion hypothesis for the designation, which is then tested with panel data from China’s 284 prefectural-level cities between 2000 and 2015. The difference-in-differences approach shows that gaining the designation increases both domestic and inbound tourism revenues, which is robust to various specifications. Heterogeneity analysis shows that the tourism promotion effect only persists for about three years, decreases over time, is smaller in developed areas, and is less salient for multiple or county-level designations.
The paper studies incentives of low‐quality sellers to disclose negative information about their products. We develop a model in which one's quality can be communicated via cheap‐talk messages only. This setting limits the ability of high‐quality sellers to separate, as any communication strategy they pursue can be costlessly imitated by low‐quality sellers. We study two factors that can incentivize low‐quality sellers to communicate their quality: buyers' loss aversion and competition. Quality disclosure reduces buyers' risk, thereby increasing their willingness to pay for the product. It also introduces product differentiation, softening the competition.
A policy concern is that the initiation of Hospital Compare (HC) reporting in Medicare provided leverage to insurers in price negotiations for lowering private sector prices without regard to hospital performance. Using the sequential Nash bargaining framework we provide economic intuition to the contrary: while average hospital prices decline under quality disclosures, hospitals with above‐average quality are able to exert a stronger bargaining position, consequently capturing prices above the market rate. To explore this issue empirically we estimate variants of difference‐in‐difference models, examining the effects of the three main scores (heart attack, heart failure, and combined mortalities) on transaction prices of related hospital procedures. States which had similar mandated reporting systems in place before the initiation of HC form the control group. Analyzing claims data of privately insured patients, we find that HC exerted downward pressure on prices. However, hospitals rated “above‐average” captured higher prices, thereby offsetting the overall policy effect fully or partially. Leads and lags analysis lends further support for our difference‐in‐difference approach. We find that highly ranked hospitals received a quality premium of 8–14%, comparable to price effects found in other health care markets. We conclude that HC was effective at constraining prices without penalizing high performers.
This paper examines how media rankings shift patterns of collaboration and deference between professional groups within organizations. Diversified and multidisciplinary organizations such as universities and hospitals often face distinct subunit evaluations that can influence coordination on interdependent tasks. Using patient-level treatment data for more than five million in-patient stays, I find that changes in the “best hospitals” rankings do not meaningfully shift treatment patterns by physicians in hospitals. However, when specialties were ranked in the top echelons (i.e., top 10) or had high categorical prestige, they were less likely to involve other specialties (i.e., ego effect) and had a higher chance of performing procedures on patients admitted in other specialties (i.e., halo effect). These effects were mostly confined to minor (i.e., less invasive) procedures, implying that the impact of external rankings on patient outcomes is relatively benign.
This paper was accepted by Olav Sorenson, organizations.
Hedge funds benefited from their umbrella brand mutual fund affiliate’s advertising and exploited this effect to circumvent a marketing ban.
We study patient choice of healthcare provider based on both objective and subjective quality measures in the context of maternal care hospital services in Germany. Objective measures are obtained from publicly reported clinical indicators, while subjective measures are based on satisfaction scores from a large and nationwide patient survey. We merge both quality metrics to detailed hospital discharge records and quantify the additional distance expectant mothers are willing to travel to give birth in maternity clinics with higher reported quality. Our results reveal that patients are on average willing to travel 0.1-2.7 additional kilometers for a one standard deviation increase in quality. Patients respond to both objective and subjective quality measures, suggesting that patient satisfaction scores may constitute important complements to clinical indicators when choosing provider.
Price transparency initiatives have recently emerged as a solution to the lack of health care price information available to consumers. This paper uses the staggered and nationwide diffusion of a leading internet-based price transparency platform to estimate the effects of price transparency on provider prices. I find a 1-4% reduction in provider prices for homogenous services, laboratory tests, but find no price response for differentiated services, office visits. Price responses are driven by active consumer use of price information. This paper demonstrates how reducing consumer search costs can spur limited firm price competition in health care markets.
It is often asserted that consumers are poorly informed about and inattentive to fuel economy, causing them to buy low-fuel economy vehicles despite their own best interest. This paper presents evidence on this assertion through two experiments providing fuel economy information to new vehicle shoppers. Results show zero statistical or economic effect on average fuel economy of vehicles purchased. In the context of a simple optimal policy model, the estimates suggest that current and proposed US fuel economy standards are significantly more stringent than needed to address the classes of imperfect information and inattention addressed by our interventions.
A szorosabb értelemben vett fogyasztóvédelem szempontjából a hagyományos közgazdaságtan általános ajánlása egyszerű volt: a fogyasztókat minél teljesebben kell informálni, és mivel gyakran ez nem áll a vállalatok érdekében, a kötelező információnyilvánosság eszközeivel szabályozásra is szükség van. A szabályozó feladata annak eldöntése, hogy mely információk számítanak „relevánsnak”. A viselkedési közgazdaságtan azonban nemcsak a kevéssé informált, hanem a korlátozottan racionális fogyasztóval is számol. Ezért a fogyasztó megtévesztése közgazdasági elmélet alapján is értelmezhetővé vált. Sőt, a megtévesztés nemcsak hazugságot, félreinformálást jelent ebben a megközelítésben, hanem a fogyasztók kognitív és döntési hibáinak, „irracionális” preferenciáinak tudatos kihasználását is. Emellett az új megközelítés a szabályozói kudarcok új szempontjait veti fel, hiszen a régi elmélet alapján a szabályozási kudarcok oka is csupán a szabályozók információs hiányosságai lehettek. A korlátozott racionalitás a szabályozókra és jogalkalmazókra is érvényes. A tanulmány ezeket a kérdéseket vizsgálja konkrét példákon – elsősorban a fogyasztói hitelezésen és szakértői szolgáltatásokon – keresztül.
In this paper, a general framework is built up to model the dynamic of consumer health plan choice and individual health insurance market competition. A primary goal is to identify driving forces to individual health insurance equilibrium market coverage and premium. In the baseline model, we introduce plan quality information search cost as an additional determinant to consumer’s plan choice. Health insurers compete under the Hotelling’s game theory framework. Equilibrium solutions of the baseline model highlight the importance of budget limit and information search cost to health plan enrollment. The more important objective is to examine the impact of market entrants on equilibrium insurance market coverage and plan prices. In the model with market entry, we add an additional dimension to the baseline model. Equilibrium solutions and numerical studies show positive impact of higher insurance market coverage and lower health plan prices. The Affordable Care Act (ACA) brought multiple unprecedented changes to the health insurance market and provided opportunities to study market dynamics and driving forces. The ACA health insurance exchange market experience shows consistency with our model findings even at the early stage of implementation. More importantly, market observations suggest that entry barriers of claim costs and information search cost are high for entrants.
This study examines whether parents’ overall satisfaction with their child’s early childhood education (ECE) program is correlated with a broad set of program characteristics, including (a) observational assessments of teacher-child interactions; (b) structural features of the program, such as teacher education and class size; (c) practical and convenience factors (e.g., hours, cost); and (d) a measure of average classroom learning gains. It then describes associations between parents’ evaluation of specific program characteristics and externally collected measures of those features. Leveraging rich data from a sample of low-income parents whose 4-year-olds attend publicly funded ECE programs, we find little correspondence between parents’ evaluations of program characteristics and any external measures of those same characteristics. We discuss policy implications, especially in light of recent federal and state informational initiatives, which aim to help families make informed ECE choices.
The National Committee for Quality Assurance (NCQA) is the most widely used accrediting body of health plans, but no study has explored how differences in health quality affect the accreditation level. Consumers may benefit as they guide health insurance purchasing decisions toward a cost-quality evaluation. The authors conducted a multinomial logistic regression analysis using data from the 2015 NCQA Quality Compass of 351 health plans. This study’s outcome variable represented NCQA accreditation at 3 levels: accredited, commendable, and excellent. The authors examined the relationship of patient satisfaction, monitoring and prevention activities, appropriate care, and readmission rates on accreditation level. Satisfaction and monitoring and prevention activities were significantly associated with higher levels of accreditation in all analyses, but readmission was not. The expanded coverage of the Affordable Care Act provides an opportunity for health plans to market to consumers the benefits of accreditation to foster higher quality care.
How does the release of health plan performance ratings influence employee health plan choice? A natural experiment at General Motors (GM) Corporation provides valuable evidence on this question. During the 1997 open enrollment period, GM disseminated a health plan report card for the first time. By comparing 1996 and 1997 enrollment patterns, our analysis estimates the impact of the report card information while accounting for fixed, unobserved plan traits. Results indicate that employees are less likely to enroll in plans requiring relatively high out-of-pocket contributions. Results with respect to report card ratings suggest that individuals avoid health plans with many below average ratings.
This article is about disclosure of quality. The question that it seeks to answer is: Does the free market offer enough incentive for business to disclose? The article concludes that whether information is of purely private value or not, more than the socially-optimal amount of disclosure takes place. The optimal policy is for the government to subsidize sale without disclosure. The article offers no support for the policy of mandatory disclosure. The results should be viewed with care, however, as they seem to depend on special features of the model, in particular the assumed impossibility of misrepresentation.
This is an article about modeling methods in information economics. A notion of "favorableness" of news is introduced, characterized, and applied to four simple models. In the equilibria of these models, (1) the arrival of good news about a firm's prospects always causes its share price to rise, (2) more favorable evidence about an agent's effort leads the principal to pay a larger bonus, (3) buyers expect that any product information withheld by a salesman is unfavorable to his product, and (4) bidders figure that low bids by their competitors signal a low value for the object being sold.
This paper presents an empirical analysis of the effects of providing information about plan quality on consumers' health plan choices in a private employment setting. Analysis of plan switching behavior suggests that the provision of quality information had a small, but significant effect on consumer plan choices. Employees were more likely to switch from plans with lower reported quality. Cross-sectional analyses of plan choice indicate that reported quality played a role in plan selection even after controlling for other health plan characteristics commonly associated with plan choice. The age of the policyholder and the type of policy purchased moderated the effects of plan characteristics on plan choice in ways that may be consequential for adverse selection.
We test the effect of report cards on consumer choice in the HMO market. Federal employees were provided with report cards on a limited basis in 1995 and then on a widespread basis in 1996. Exploiting this natural experiment, we find that subjective measures of quality and coverage influence plan choices, after controlling for plan premiums, expected out of pocket expenses and service coverages. The effect is stronger within a small sample of new hires compared to a larger sample of existing federal employees. We also find evidence that report cards increase the price elasticity of demand for health insurance.
I examine Health Maintenance Organizations' (HMOs) voluntary disclosure of product quality, which is not as complete as unraveling theories predict. After controlling for cost and demand factors, I find that HMOs use voluntary disclosure to differentiate from competitors, with lower disclosure rates in highly competitive markets. These findings are consistent with product differentiation, but challenge the intuition that competition should lead to more provision of quality information.
I use data from the University of California to empirically examine the role of social learning in employees' choices of health plans. The basic empirical strategy starts with the observation that if social learning is important, health plan selections should appear to be correlated across employees within the same department. Estimates of discrete choice models in which individuals' perceived payoffs are influenced by coworkers' decisions reveal a significant (but not dominant) social effect. The strength of the effect depends on factors such as the department's size or the employee's demographic distance from her coworkers. The estimated effects are present even when the model allows for unobserved, department-specific heterogeneity in employee preferences, so the results cannot be explained away by unobservable characteristics that are common to employees of the same department.
We estimate a Bayesian learning model in order to assess the value of health plan performance information and the extent to which the explicit provision of information about product quality alters consumer behavior. We take advantage of a natural experiment in which health plan performance information for HMOs was released to employees of a Fortune 50 company for the first time. Our empirical work indicates that the release of information had a small but statistically significant effect on health plan choices, causing 3.1% of employees to switch health plans. Although consumers were willing to pay an extra 10 per year. The relatively small impact of the ratings arises because the ratings were estimated to be very imprecise measures of quality. More precise measures of quality could have been more valuable.