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* Magnet Recognition® is a quality designation granted by the American Nurses Credentialing Center.
* If patients and payers interpret the Magnet Recognition designation as a signal of highquality care, then demand for Magnet hospitals should increase and lead to an increase in market share and revenue.
* This study examines the effects of the Magnet Recognition signal on both hospital and patient reimbursement.
* Using a difference-in-difference model with hospital fixedeffects, results indicate Magnet Recognition signal does not affect either patient reimbursement or market share of designated hospitals compared to non-designated hospitals.
* While Magnet Recognition has been associated with various positive benefits for patients, nurses, and the organization, hospital executives and policymakers should carefully consider the financial resources dedicated to publicizing the Magnet Recognition designation.
HOSPITALS IN THE U.S. FACE ongoing challenges as they strive to achieve their missions. They are struggling to operate in a turbulent healthcare environment, consisting of uninsured and underinsured patients (Grant, Colello, Riehle, & Dende, 2010), changing reimbursement policies, broadening regulatory requirements, and increasing emphasis on quality care outcomes (Parsons & Cornett, 2011). Despite the challenging operating environments, hospitals are trying to survive and maintain delivery of high-quality healthcare services. Maintaining financial viability, hospitals are employing operational strategies to provide distinct advantages and differentiate themselves from other competitors, potentially providing opportunities to increase revenue either through market share or reimbursement. One way a hospital can distinguish itself is by signaling the underlying quality of its products and services.
Signals are used to reduce information symmetry, which is defined as an imbalance of information between two parties, where one side has more information than another (Connelly, 2011). Signals are used in health care to communicate the underlying quality of a hospital's products and services to its stakeholders. Signals such as corporate name changes, quality designations, product branding, advertising expenditures, and management quality communicate the commitment of resources to differentiation and emphasize the organization's commitment to quality. The information contained in the signal permits consumers to make informed decisions and distinguish between high-quality and low-quality products. Some hospitals communicate directly, using public reporting of quality of care information (Faber, Bosch, Wollersheim, Leatherman, & Grol, 2009), such as Hospital Compare (Centers for Medicare & Medicaid Services [CMS], 2015)....