The conventional wisdom for the healthcare sector is that idiosyncratic features leave little scope for market forces to allocate consumers to higher performance producers. However, we find robust evidence - across several different conditions and performance measures - that higher quality hospitals have higher market shares and grow more over time. The relationship between performance and allocation is stronger among patients who have greater scope for hospital choice, suggesting that patient demand plays an important role in allocation. Our findings suggest that healthcare may have more in common with “traditional” sectors subject to market forces than often assumed.

ClinicalTrials.gov identifier: NCT02467933.

Inappropriate prescribing is a rising threat to the health of Medicare beneficiaries and a drain on Medicare's finances. In this study, we used a randomized controlled trial approach to evaluate a low-cost, light-touch intervention aimed at reducing the inappropriate provision of Schedule II controlled substances in the Medicare Part D program. Potential overprescribers were sent a letter explaining that their practice patterns were highly unlike those of their peers. Using rich administrative data, we were unable to detect an effect of these letters on prescribing. We describe ongoing efforts to build on this null result with alternative interventions.Learning about the potential of light-touch interventions both effective and ineffective will help produce a better toolkit for policy makers to improve the value and safety of health care. The Centers for Medicare and Medicaid Services (CMS) is exploring a variety of innovative approaches to combat overprescribing behavior. This study evaluated one approach:an inexpensive intervention to affect questionable prescribing by sending an informative letter to health care providers suspected of improperly writing prescriptions for controlled substances through Medicare Part D, the prescription drug insurance program for Medicare beneficiaries.Alongside the evaluation of this initial effort, the study further considered how the letter approach could be continuously adapted and analyzed so that it may be more effective in the future.Insurers frequently communicate with their providers to ensure billing is accurate and medically necessary. The Medicare program, for example, regularly sends billing reports to physicians and hospitals. Our study was the first attempt that we know of to rigorously evaluate an informative letter aimed at reducing potentially inappropriate medical practices. This approach was worth exploration given the existing literature showing that such letters can have effects on a wide range of outcomes, including health care outcomes such as physicians' vaccinating their patients and legal compliance outcomes such as individuals' payment of delinquent taxes. [8][9][10] In much of the literature, these effects are found even when the letters do not mention penalties for noncompliance, which matches our approach in this study. to identify "outlier prescribers"--physicians and other practitioners who prescribed vastly more controlled substances (more than 400 percent more, on average) than their peers. We then randomized these prescribers into a treatment group and a control group. The treatment group received a letter depicting their level of prescribing in comparison to their peers (see online Appendix Exhibit A1), [11] while the control group received nothing. Using Part D administrative data, we tracked the effect of the letter on prescribing behavior during the following ninety days.We were able to perform preliminary evaluations of the letters just months after they were sent. This article presents our full evaluation, which took less than ...