For years, Medicare and other payers have used quality measures to evaluate the quality of care patients receive at various types of providers settings (e.g., hospital, home health agencies, skilled nursing homes). For some payers, higher quality scores/higher star ratings lead to direct increases in reimbursement through a value-based purchasing arrangement. Typically, value-based payment systems include additional bonus payments for high quality providers.
However, there is another mechanism through which quality of care could improve provider finances: increased demand. If patients are responsive to star ratings or physicians who refer patients are sensitive to star ratings, better measured quality can increase provider revenue. A key question is what is the elasticity of demand with respect to star ratings? due to bonus payments.
A paper by Schwartz et al. (2021) aims to estimate this relationship for quality metrics related to home health agencies (HHA). Using assessment data on quality of care before and after star ratings were published, the authors use a discrete choice model and find that:
The introduction of star ratings was associated with a 0.88 percentage point increase in the probability of selecting a high quality HHA and a 0.81 percentage point increase in the probability of selecting a highly ranked patient experience HHA. Patients admitted from the community, and black and Medicare-Medicaid dual eligible beneficiaries experienced larger increases in their likelihood of selecting high-rated agencies than inpatient, white and non-dual beneficiaries
It looks like publishing quality measures does help drive demand to better quality providers.
- Schwartz ML, Rahman M, Thomas KS, Konetzka RT, Mor V. Consumer Selection and Home Health Agency Quality and Patient Experience Stars. Health Services Research.