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ABSTRACT Previous research has found that Hospital Compare, Medicare's public reporting initiative, has had little impact on patient outcomes. However, little is known about the initiative's impact on hospital prices, which may be significant because private insurers are generally well positioned to respond to quality information when negotiating prices with hospitals. We estimated difference-in-differences models of the effects of Hospital Compare quality reporting on transaction prices for two major cardiac procedures, coronary artery bypass graft (CABG) and percutaneous coronary intervention (PCI). States that had mandated their own public reporting systems before the implementation of Hospital Compare formed the control group. We found that prices for these procedures continued to increase overall after the initiation of Hospital Compare quality scores, but the rate of increase was significantly lower in states with no quality reporting metrics of their own before Hospital Compare, when compared to the control states (annual rates of increase of 4.4 percent versus 8.7 percent for PCI, and 3.9 percent versus 10.6 percent for CABG, adjusted for overall inflation). This finding implies that Hospital Compare provided leverage to purchasers in moderating price increases, while adding competitive pressures on hospitals. Providing accurate quality information on both hospitals and health plans could benefit consumers.
Hospital Compare, launched in 2005 by the Centers for Medicare and Medicaid Services (CMS), is an important initiative aimed at promoting competition in the US hospital industry. Initially, Hospital Compare consisted of a set of process measures designed to support consumers' decision making in choosing acute care hospitals and to motivate hospitals to examine and improve health care delivery. In June 2007 Hospital Compare introduced outcome-based quality scores- specifically, mortality-based hospital rankings- that were deemed to be more meaningful to patients than process-based quality measures.1
Nevertheless, neither Hospital Compare nor any other publicly reported hospital quality measure appears to have had much impact on consumers' choice of hospitals.2 In a 2008 survey only 6 percent of Americans reported that they had heard of the Hospital Compare website (http://www.hospitalcompare.hhs.gov), and only 20 percent said they had seen any information that compared hospitals on quality.3
Whether public reporting of hospital quality would have an impact on the pricing of hospital services for the privately insured is an open question. Most such patients do...