Is Quality of Cardiac Hospital Care a Public or Private Good?

Abstract

There are many studies examining the effects of financial pressure from different payment sources on hospital quality of care, but most have assumed that quality of care is a public good in that payment changes from one payer will affect all hospital patients rather than just those directly associated with the payer. Although quality of hospital care can be either a public or private good, few studies have tested which of these scenarios are more likely to hold. To examine whether the change in the magnitude of in-hospital mortality for Medicare and managed care patients is different based on financial pressure resulting from the Balanced Budget Act and growing managed care market penetration; and to examine what role hospital competition may play in affecting these changes. The unit of analysis for the study was the hospital. Multiple data sources were used including the Agency for Healthcare Research and Quality State Inpatient Databases, American Hospital Association Annual Surveys, Area Resource File, and health maintenance organization data from InterStudy. A difference-in-difference-in-difference model was applied for a 2-period panel design. In general, Balanced Budget Act financial pressure and managed care market share did not magnify the difference in in-hospital mortality rates between Medicare and managed care patients. The results suggest that quality of cardiac care in the hospital setting is more likely to be a public good; however, more investigation using other quality indicators and the role of hospital competition under different payment systems is recommended.