The Mayo Clinic is renowned as one of the best health care facilities in the world. Yet it also spends millions of dollars to make its buildings look like this. Why do hospitals spend so much money on making their buildings look beautiful instead of directing those funds towards clinical care?
An NBER working paper by Goldman and Romley (2008) finds that patient demand is based much more on hospital amenities than on their clinical quality.
“From the patient perspective, hospital quality…embodies amenities as well as clinical quality. We also find that a one-standard-deviation increase in amenities raises a hospital’s demand by 38.4% on average, whereas demand is substantially less responsive to clinical quality as measured by pneumonia mortality. These findings imply that hospitals may have an incentive to compete in amenities, with potentially important implications for welfare.”
- Goldman and Romley (2008) “Hospitals As Hotels: The Role of Patient Amenities in Hospital Demand,” NBER WP #14619.