It's the standard response to the aspiration of (somehow) making health care more like other industries, in which quality and productivity tend to grow over time. Supporting this tendency, in other markets, purveyors of higher quality (and/or lower price) goods and services gain market share, and the additional profit it affords. Could this happen in health care?
"Health care is different," slams the door. It's a market in which most services are financed by insurance (blunting sensitivity to price) and in which few of us know in advance exactly what we're getting, whether we need it, or whether it will work (blunting sensitivity to quality). As such, could better performance be rewarded with greater market share?
In an NBER working paper, Amitabh Chandra, Amy Finkelstein, Adam Sacarny, Chad Syverson show that it is. In short, examining several conditions (heart attacks, heart failure, pneumonia) and surgical procedures (hip and knee replacements), they found that higher quality hospitals (those offering lower mortality and readmissions, hewing more closely to practice guidelines) gain market share.
Market share gains to quality is important for two reasons. First, patients may benefit because more people receive higher quality care. (Caveat: If prices rise too quickly, higher quality care may not be "worth it" to patients or, more to the point, the insurers or programs that finance their care.)
For example, the authors found that the market share gains associated with higher quality can explain almost a one percentage point increase in 30-day heart attack survival for traditional Medicare patients over the 1996-2008 period. Compared to gains from medical technology, this increase in survival is large, "about half of the magnitude of the survival gains attributed to each of two major breakthroughs in AMI treatment: reperfusion and primary angioplasty," the authors wrote.
Market share increases also can explain survival gains for heart failure and pneumonia, but far less, about 0.21 and 0.10 percentage points, respectively.
Second, higher quality providers may benefit from greater market share because higher patient volume means higher revenue. (Caveat: If prices are not high enough, additional revenue may not be "worth it" because it doesn't cover additional costs.) As Taylor Christensen argued, rewarding value with volume may be the most promising means of health care quality improvement.
According to Chandra et al., value (or quality) is rewarded with volume. They found statistically significant, risk-adjusted associations between greater hospital market share and greater survival, lower readmissions, and better process care quality. A one percentage point increase in a hospital's risk-adjusted heart attack survival rate is associated with 17 percent greater patient volume. A one percentage point reduction in readmission rate is associated with 9 percent greater volume. Higher frequency adherence to heart attack care guidelines was also associated with greater patient volume.
The authors found similar results for heart failure. For pneumonia, results were smaller in magnitude and not statistically significant for readmissions. For hip and knee replacement surgery, lower readmission rates (the only measure for the procedures available from CMS) were associated with greater patient volume.
They also found that heart attack patients are willing to travel further for higher quality care. To receive care at a hospital with one percentage point greater survival or lower readmission rate a heart attack patient will travel 1.8 or 1.1 miles further, respectively. They estimated a similar relationship with greater use of guideline care processes too. Patients will travel further for better care.
However, they found that patient satisfaction tends to be negatively associated with market share. Why would patients flock to hospitals at which they have worse experiences? For one thing, the patient satisfaction measures provided by CMS and used in the study are for all patients, not for the ones receiving the specific types of care for which clinical quality was examined (heart attacks, heart failure, pneumonia). It could be that for those conditions patient satisfaction and clinical quality align, and this study can't observe that.
It's also true that few patients are aware of or use publicly reported health care quality measures. Instead, their hospital choices are likely to be highly influenced by their doctors' preferences, and doctors may care more about clinical quality than patient satisfaction. As Chandra et al. wrote,
[H]ospitals acquire a reputation for good outcomes and this reputation spreads through physicians’ professional networks and patients’ social networks, where it influences patients and their surrogates to request treatment at hospitals that are better at producing survival.
And yet, a consensus is emerging in the literature that patient satisfaction, broadly, and specific, objective measures of clinical quality do align. Patient satisfaction is associated with hospital process quality, lower rates of hospital readmissions and heart attack mortality, some metrics of surgical quality, and better long-term outcomes.
On the whole, it seems that health care shares some important market characteristics as other industries: higher quality hospitals gain market share, just as higher quality cell phone and auto manufacturers do. And, across many studies, patient satisfaction is positively associated with better clinical quality. Health care is different, but not as different as we may have thought.
Austin B. Frakt, PhD, is a health economist with the Department of Veterans Affairs, an Associate Professor at Boston University’s School of Medicine and School of Public Health, and a Visiting Associate Professor with the Department of Health Policy and Management at the Harvard T.H. Chan School of Public Health. He blogs about health economics and policy at The Incidental Economist and tweets at @afrakt. The views expressed in this post are that of the author and do not necessarily reflect the position of the Department of Veterans Affairs, Boston University, or Harvard University.