"Pay for Ranking": The Impact of Hospital Ascending to The National Top 100 on Inpatient Bills

Abstract

In healthcare markets with information asymmetry, hospital programs help patients identify high-quality providers. As yet, it is unclear how and to what extent higher-ranked hospitals capture ranking premiums from inpatients and medical insurers. In this paper, we append the public medical insurance claims data at the inpatient level from one of the national central cities in China with the hospital program data at the hospital level from the Fudan Chinese Hospital League Table (Fudan CHLT). A difference-in-differences (DID) estimator is constructed by combining the variation of categories (e.g., the National Top 100 or the Regional Top 20) across hospitals and periods. We find that a hospital ascending to the National Top 100 group significantly increases 8.3 percent, 6.9 percent, and 7.6 percent in inpatients' total costs, reimbursement costs, and out-of-pocket costs, respectively. The leads and lags analysis and the robustness check by matching inpatients and placebo tests further verify our findings. These results suggest that hospital reputation programs may unintentionally raise medical costs.