Abstract
Quality report cards addressing information asymmetry in the health care market have become a popular strategy used by policymakers to improve the quality of care for older people. Using individual level data from the largest German sickness fund merged with institutional level data, we examine the relationship between reported nursing home quality, as measured by recently introduced report cards, nursing home prices, nursing home's location, and the individual choice of nursing homes. Report cards were stepwise introduced as of 2009, and we use a sample of 2010 that includes both homes that had been evaluated at that time and that had not yet been. Thus, we can distinguish between institutions with above and below average ratings as well as nonrated nursing homes. We find that the probability of choosing a nursing home decreases in distance and price. However, we find no economically significant effect of reported quality on individuals' choice of nursing homes.
Highlights
As a consequence of ever increasing health care expenditures, health care markets in most countries are constantly subject to reform
Our results suggest a negative relationship between the individual nursing home choice and both travel time as well as nursing home prices
Only after a series of public scandals about very poor quality in some German nursing homes (e.g., Tscharnke, 2009), health insurance providers and nursing home owners took joint action to improve the transparency of nursing home quality
Summary
As a consequence of ever increasing health care expenditures, health care markets in most countries are constantly subject to reform. One idea to reduce costs is an increase in efficiency by the implementation of competition components like increased price or quality transparency of health care providers This is supposed to equip demanders of health services with possibilities to make a better informed choice of hospitals, nursing homes, or physicians. Werner, Norton, Konetzka, and Polsky (2012) analyze the impact of the introduction of quality report cards on changes in the market share of nursing homes in the United States. In their market-level demand model, they do not take prices and distance into account, and they restrict their analysis to a sample of short-stay residents of nursing homes. We discuss potential reasons for this empirical finding—such as low awareness or perceived insufficient content of the report cards—in the conclusion
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