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The influence of competitive markets on improving quality of care through public reporting: the case of home health care

Polsky D, David G, Werner RM. The influence of competitive markets on improving quality of care through public reporting: the case of home health care. Paper presented at: International Health Economics Association Biennial World Congress on Health Economics; 2011 Jul 11; Toronto, Canada.


A high quality and well functioning home health care industry is an essential part of an integrated health care system that strives to reduce health care costs and improve the health outcomes of the population. Home health care is defined as skilled professional care of limited duration delivered in the home for a specific medical need. For home health agencies to have an economic incentive to deliver high quality care, consumers need a credible way to evaluate the quality of home health providers. In November of 2003, the Home Health Quality Initiative (HHQI) for reporting of quality information on the performance of home health agencies was launched nationally after a 9 month trial period in 7 pilot states. Public reporting can improve quality through the pathway of selection where average quality increases because high performers are used more often as a result of knowledge about performance. The pathway of change can also raise average quality where agencies themselves improve quality as a result of the economic incentives created by consumers selecting higher quality agencies. Market competition is the mechanism for both of these pathways; hence we hypothesize that public reporting will lead to greater quality improvement in more competitive markets. We use panel data on home health agency quality and patient flows capturing the years prior to (2001-2003) and following (2004-2005) the launch of HHQI. The Home Health Outcome and Assessment Information Set (OASIS) is our primary data source as it contains a detailed longitudinal picture of the clinical health status of every home health patient. Patient-level data are linked to Medicare claims as well as area-level and agency data. We define our sample, episodes of care, and risk-adjusters consistent with the methods of HHQI. We measure HHQI and non-HHQI quality indicators. Our measure of competition is the Herfindahl index market concentration measure which was estimated as the weighted average of zipcode-level distance-instrumented Herfindahl indexes for the zipcodes from which an agency drew its patients, where the weights were each zipcode's share of the agency's Medicare patient load (Kessler and McClellan, 2000). With a sample of 7.1 million home health agency admissions for 7,110 agencies, we estimate the effect of public reporting as the pre-post HHQI difference in quality between the states using the difference-in-difference estimator with the pilot-states acting as contemporaneous control of time trends. We interact the pre-post measure with HHI to assess the extent to which the effects of public reporting vary by market concentration. Results suggest that less concentrated markets do indeed experience greater improvements in quality. However, HHQI itself improved quality measures by an average of 2%. These effects were modest and competition can only explain about half of these modest improvements. These results are consistent with previous literature that finds, at best, modest improvements in quality from public reporting. What is striking is how concentrated home health agency markets are. It is possible that the quality improvement from HHQI was limited by the limited completion between home health agencies.

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