Do patients choose hospitals that improve their health?

Many health care systems collect and disseminate information on provider quality in order to facilitate patient choice and induce competitive behaviour amongst providers. The Department of Health in England has recently mandated the collection of patient-reported health outcome measures (PROMs) for the purpose of performance assessment and consumer information. This is the first attempt to routinely measure the gain in health that patients experience as the result of care and thus offer a more comprehensive picture of hospital quality than existing ‘failure measures’ such as mortality or readmission rates. In this paper we test whether hospital demand responds to hospital quality measures based on health gains in addition to more conventional measures. We estimate hospital choice models for elective hip replacement surgery using rich administrative data for all publicly-funded patients in the English NHS in 2010-2012. Our focus is on two key aspects of hospital choice: 1) the extent to which patients are more likely to choose hospitals which are expected to achieve larger improvements in patients’ health and 2) whether patients’ response to quality differs with their morbidity, as measured by pre-operative health status, and other characteristics such as age or income deprivation. In order to address potential endogeneity bias we implement an empirical strategy based on lagged explanatory variables, hospital fixed effects and a control group design based on demand for emergency hip replacement. Our results suggest that hospitals can increase demand by 9% if they increase the average health gains that patients experience by one standard deviation. Hospital demand has a higher elasticity with respect to average health gains than emergency readmission or mortality rates. Elective patients are twice as willing as emergency hip replacement patients to travel further for an increase in quality.