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The effect of hospital cost/price on quality of care

Limited empirical evidence exists regarding the effect of price changes on hospital behavior and the quality of care. Additionally, an overview of the results of prior literature is lacking. This study aims to provide a synthesis of existing research concerning the relationship between hospital cost/price and the quality of care. This project has received funding from the European Union’s Horizon 2020 research and innovation programme under the Marie Skłodowska-Curie Grant Agreement No 721402.

Health

Providing high-quality healthcare services at a reasonable cost is among the main policy goals in many countries. In recent decades, hospital reimbursement systems have undergone substantial revisions in many countries to reduce spending and increase the quality of care. Hence, hospital prices have been subject to changes. Changes in price might also affect the hospital quality in several ways. First, if hospitals increase their volume after a price increase, the increase in volume could lead to a higher quality due to institutional learning effects. Additionally, higher prices might enable hospitals to spend more money (i.e. increase resources) on service provision, which might also have positive effects on the quality of care. However, hospitals might also be unwilling or unable to adjust their volume or resource input and instead maximize profits such that a price change has no effect on the quality of care. In this study, we conducted a systematic literature review to identify and summarize evidence regarding the association between cost/price and the quality of care in the hospital setting. To the best of our knowledge, this study represents the first comprehensive systematic literature review focusing on the association between cost/price and the quality of care that is not geographically restricted. The most frequent finding in our included studies was a nonsignificant association between price/cost and the quality of care (47% of all associations). Regarding our findings, the share of positive associations between cost/price and the quality of care is higher when price is assessed instead of cost. One potential mechanism implies that in the face of a price increase for a particular diagnosis or treatment, more patients may be admitted to the hospital (i.e. volume increases), which could lead to a higher quality of care due to institutional learning. Moreover, higher prices might enable hospitals to spend more on service provision, which might have a positive effect on the quality of care. The share of positive associations between cost/price and the quality of care is higher when process rather than outcome measures are assessed. In summary, we find highly mixed evidence of the association. One potential explanation is the multiple ways that price and cost can relate to the quality of care. Another explanation might be the high heterogeneity across the included studies. Most notably, the overall pattern of the relationships between hospitals’ price-quality and cost-quality were quite similar. Indeed, some variations can be explained by the studies’ characteristics. In particular, we find that the proportion of studies that detected a significantly positive association is higher when: (a) price/reimbursement is used (instead of cost); (b) process measures are used (instead of outcome measures); (c) the focus is on AMI, CHF, and stroke patients (instead of patients with other clinical conditions or all patients); and (d) the methodological approach used to address confounding is more sophisticated. Regarding our findings, the share of positive associations between cost/price and the quality of care is higher when price is assessed instead of cost. One potential mechanism implies that in the face of a price increase for a particular diagnosis or treatment, more patients may be admitted to the hospital (i.e. volume increases), which could lead to a higher quality of care due to institutional learning. It is also higher when process rather than outcome measures are assessed; when the focus is on AMI, CHF, and/or stroke patients (instead of patients with other clinical conditions or all patients) and when the methodological approach used to address confounding is more advanced. In conclusion, our review suggests that there is no general relationship between cost/price and the quality of care. However, when accounting for endogeneity, the evidence suggests that a positive relationship exists.

Keywords

health, cost/price, quality of care