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Economics for Healthcare Managers Robert H. Lee

“Quality report cards are everywhere,” said Kai. “Some of the early efforts were real clunkers,

but most look pretty sensible now. It makes sense to offer consumers information instead of protecting

them from the consequences of their ignorance. A lot of report cards emphasize clinical issues, but some

look at courtesy and customer service. The advantages of report cards are immense. Physicians and

patients get systematic information that helps them choose specialists and hospitals. Providers have an

incentive to improve performance in areas they might have overlooked, and those who cannot compete

are likely to drop out of the market. Quality report cards have no downside. Settings up elaborate pay-

for-performance schemes may not even be necessary. Fear of the fickle consumer may be incentive

enough.”

“While I like the idea of report cards,” replied Leslie, “researchers have find little evidence that

they have a significant impact. In principle, report cards may push out low quality firms, induce entry by

high quality firms, or encourage existing firms to improve quality, but the evidence is far from

compelling, as Dranove and Jin argued in 2010. Epsein noted in 2010that study after study has found

that report cards seem to have modest impacts on referrals and market share, probably because

referring physicians already steer patients to higher quality providers. I like the idea of public reporting

of price and quality data, but it’s hard to make the case that report cards have had much of an effect.”

“Whoa,” replied Kai. “I think that you are getting confused. Most doctors and hospitals provide

comparable levels of service. Only a few fall short of the mark. The goal is to improve population

outcomes by steering patients away from those providers or getting the providers to improve. A few

patient switches are enough to move market share, and even if we can’t show clearly that report cards

work, everyone is improving. Where we have report cards, we see better performance. That’s enough

for me.”

Discussion Questions:

 What evidence can you find that report cards have improved quality?

 By what mechanisms could cards improve reported market outcomes?

 Does the scarcity of scientific evidence on the effectiveness of report cards matter?

 Could publication of performance data be advantageous to hospitals or physicians?

 How do report cards address information asymmetries? Would reducing information

asymmetries guarantee better markets?

 Does it matter whether report cards are produced by governments or private organizations?

 Why are a few patient switches enough to influence market and outcomes?

Changing Consumer Information Case 17.3