Do patients choose hospitals with high quality ratings? Empirical evidence from the market for angioplasty in the Netherlands

A necessary condition for competition to promote quality in hospital markets is that patients are sensitive to differences in hospital quality. In this paper we examine the relationship between hospital quality, as measured by publicly available quality ratings, and patient hospital choice for angioplasty using individual claims data from a large health insurer. We find that Dutch patients have a high propensity to choose hospitals with a good reputation, both overall and for cardiology, and a low readmission rate after treatment for heart failure. Relative to a mean readmission rate of 8.5% we find that a 1%-point lower readmission rate is associated with a 12% increase in hospital demand. Since readmission rates are not adjusted for case-mix they may not provide a correct signal of hospital quality. Insofar patients base their hospital choice on such imperfect quality information, this may result in suboptimal choices and risk selection by hospitals.