Information and sorting in the market for obstetrical services

Abstract

Using a statistical model and a partial equilibrium economic search model, we develop a methodology for appraising the value of consumer information about the quality of health care providers and apply it to information about physicians' predispositions to perform cesarean section deliveries. There are three primary results. First, information's value is roughly proportional to a simple statistical metric of its accuracy; the constant of proportionality can be imputed from knowledge of consumer search methods and consumer preferences. Second, the function governing the production of information from data 'inputs' can have surprising economic properties, such as economies of scale, that usefully inform the efficient production of consumer information. These properties are robust even when the value of information cannot be precisely determined. Third, information's value is enhanced by the way physicians are sorted into hospitals but greatly attenuated by the presence of other dimensions of physician heterogeneity. Under plausible assumptions, the value of information in our empirical application is small enough that it is not surprising that consumers do not utilize it when selecting a physician.

Information disclosure policy: Do state data processing efforts help more than the information disclosure itself?

“…Our findings confirm the results of health care studies that simply making data available may have little effect (Dranove et al, 2003;Grant, 2005;Mennemeyer, Morrisey, & Howard, 1997). Information is useful to end users only insofar as it is accurate and relatively easy to use.…”

“…Grant (2005) found that data made available on the rates of cesarean sections by hospitals and physicians was not being used by consumers because it was insufficiently accurate and too aggregated to give correct, useful signals to consumers. He argued that the value of information could be improved by increasing its accuracy and degree of detail.…”

“…For example, while a range of disclosure policies designed to improve the quality of health care have been adopted since the 1980s, empirical studies have shown that the results have been mixed at best, raising various utilization issues beyond the availability of information (Dranove et al, 2003;Grant, 2005;Mennemeyer, Morrisey, & Howard, 1997). First of all, simple publication of associated raw data does not guarantee its utilization.…”

Malpractice Experience and the Incidence of Cesarean Delivery: A Physician-Level Longitudinal Analysis

“…Uncertainty also affects the consumer who cannot directly observe provider quality when choosing a physician and so must infer it based on available information (Grant 2003). The resolution of malpractice claims provides public information that consumers can use when choosing a provider, and we provide some evidence that they do use this information-physician volume drops following the disposition of a large claim.…”

The formation and evolution of physician treatment styles: An application to cesarean sections

“…Stano and Folland (1988) assigned a routine office visit a value of one, and every other service a value proportional to its charge relative to a routine office visit. Grant, 2005;Goyert et al, 1989), RVUs per hospital admission (Welch et al, 1994), hospitalization rates, hospital days, and length of hospital stays (Roos et al, 1986), total medical expenditures (Phelps, 2000), and medical expenditures on outpatient care (Grytten and Sorensen, 2003).…”