Death spiral
The Long-Term Health Impacts of Medicaid and CHIP
Owen Thompson
Journal of Health Economics, January 2017, Pages 26–40
Abstract:
This paper estimates the effect of US public health insurance programs for children on health. Previous work in this area has typically focused on the relationship between current program eligibility and current health. But because health is a stock variable which reflects the cumulative influence of health inputs, it would be preferable to estimate the impact of total program eligibility during childhood on longer-term health outcomes. I provide such estimates by using longitudinal data to construct Medicaid and CHIP eligibility measures that are observed from birth through age 18 and estimating the effect of cumulative program exposure on a variety of health outcomes observed in early adulthood. To account for the endogeneity of program eligibility, I exploit variation in Medicaid and CHIP generosity across states and over time for children of different ages. I find that an additional year of public health insurance eligibility during childhood improves a summary index of adult health by .079 standard deviations, and substantially reduces health limitations, chronic conditions and asthma prevalence while improving self-rated health.
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Market Share Matters: Evidence Of Insurer And Provider Bargaining Over Prices
Eric Roberts, Michael Chernew & Michael McWilliams
Health Affairs, January 2017, Pages 141-148
Abstract:
Proposed mergers among large US health insurers and growing consolidation among providers have renewed concerns about the effects of market concentration on commercial health care prices. Using multipayer claims for physician services provided in office settings, we estimated that — within the same provider groups — insurers with market shares of 15 percent or more (average: 24.5 percent), for example, negotiated prices for office visits that were 21 percent lower than prices negotiated by insurers with shares of less than 5 percent. Analyses stratified by provider market share suggested that insurers require greater market shares to negotiate lower prices from large provider groups than they do when negotiating with smaller provider groups. For example, office visit prices for small practices were $88, $72, and $70, for insurers with market shares of <5 percent, ≥5 to <15 percent, and ≥15 percent, respectively, whereas prices for large provider groups were $97, $86, and $76, exhibiting a continued decrease across higher insurer-market-share categories. These results suggest that mergers of health insurers could lower the prices paid to providers, particularly providers large enough to obtain higher prices from insurers with modest market shares. Continued monitoring will be important for determining the net effects of the countervailing trends of insurer and provider consolidation on the affordability of health care.
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Technological Change and Risk Adjustment: Benefit Design Incentives in Medicare Part D
Colleen Carey
American Economic Journal: Economic Policy, forthcoming
Abstract:
Subsidized health insurance markets use diagnosis-based risk adjustment to induce insurers to offer an equitable benefit to individuals of varying expected cost. I demonstrate that technological change after risk adjustment calibration – new drug entry and the onset of generic competition – made certain diagnoses profitable or unprofitable in Medicare Part D. I then exploit variation in diagnoses’ profitability driven by technological change to show insurers designed more favorable benefits for drugs that treat profitable diagnoses as compared to unprofitable diagnoses. In the presence of technological change, risk adjustment may not fully neutralize insurers’ incentives to select through benefit designs.
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One In Five Inpatient Emergency Department Cases May Lead To Surprise Bills
Christopher Garmon & Benjamin Chartock
Health Affairs, January 2017, Pages 177-181
Abstract:
A surprise medical bill is a bill from an out-of-network provider that was not expected by the patient or that came from an out-of-network provider not chosen by the patient. In 2014, 20 percent of hospital inpatient admissions that originated in the emergency department (ED), 14 percent of outpatient visits to the ED, and 9 percent of elective inpatient admissions likely led to a surprise medical bill.
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Christopher Brunt & John Bowblis
Applied Economics, forthcoming
Abstract:
This article explores the differentiated effects of health insurer market concentration on net compensation of employees across distinct firm sizes. Consistent with the existing literature evaluating insurer market concentration and the theory of compensating differentials, we find evidence of higher premiums and reduced net compensation for employees in markets with more concentrated insurers. Furthermore, we find evidence that the magnitude of these effects is distinctly smaller for large employers. This implies that mergers of large health insurance companies may have a significant impact on small businesses but that the effect is mitigated for larger employers.
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Anna Wallace et al.
Academic Medicine, January 2017, Pages 108–115
Purpose: To examine associations between board certification of psychiatrists and neurologists and quality-of-care measures, using multilevel models controlling for physician and patient characteristics, and to assess feasibility of linking physician information with patient records to construct quality measures from electronic claims data.
Method: The authors identified quality measures and matched claims data from 2006 to 2012 with 942 board-certified (BC) psychiatrists, 868 non-board-certified (nBC) psychiatrists, 963 BC neurologists, and 328 nBC neurologists. Using the matched data, they identified psychiatrists who treated at least one patient with a schizophrenia diagnosis, and neurologists attending patients discharged with a principal diagnosis of ischemic stroke, and analyzed claims from these patients. For patients with schizophrenia who were prescribed an atypical antipsychotic, quality measures were claims for glucose and lipid tests, duration of any antipsychotic treatment, and concurrent prescription of multiple antipsychotics. For patients with ischemic stroke, quality measures were dysphagia evaluation; speech/language evaluation; and prescription of clopidogrel, low-molecular-weight heparin, intravenous heparin, and warfarin (for patients with co-occurring atrial fibrillation).
Results: Overall, multilevel models (patients nested within physicians) showed no statistically significant differences in quality measures between BC and nBC psychiatrists and neurologists.
Conclusions: The authors demonstrated the feasibility of linking physician information with patient records to construct quality measures from electronic claims data, but there may be only minimal differences in the quality of care between BC and nBC psychiatrists and neurologists, or there may be a difference that could not be measured with the quality measures used.
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The Impact of Medicare Part D on Self-Employment
Jeremy Moulton, Jeffrey Diebold & John Scott
Research on Aging, January 2017, Pages 64-85
Abstract:
We explore the relationship between access to affordable health insurance and self-employment using exogenous variation from the introduction of Medicare Part D that reduced the out-of-pocket cost of prescription drugs and improved health outcomes in a difference-in-differences model using the American Community Survey. We find that our treatment group of individuals aged 65–69 were 0.5 percentage points (or 5%) more likely to be self-employed in relation to a control group aged 60–64.
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Sorry is Never Enough: The Effect of State Apology Laws on Medical Malpractice Liability Risk
Benjamin McMichael, Lawrence Van Horn & Kip Viscusi
Vanderbilt University Working Paper, December 2016
Abstract:
State apology laws offer a separate avenue from traditional damages-centric tort reforms to promote communication between physicians and patients and to address potential medical malpractice liability. These laws facilitate apologies from physicians by excluding statements of apology from malpractice trials. Using a unique dataset that includes all malpractice claims for 90% of physicians practicing in a single specialty across the country, this study examines whether apology laws limit malpractice risk. For physicians who do not regularly perform surgery, apology laws increase the probability of facing a lawsuit and increase the average payment made to resolve a claim. For surgeons, apology laws do not have a substantial effect on the probability of facing a claim or the average payment made to resolve a claim. Overall, the evidence suggests that apology laws do not effectively limit medical malpractice liability risk.
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National Health Spending: Faster Growth In 2015 As Coverage Expands And Utilization Increases
Anne Martin et al.
Health Affairs, January 2017, Pages 166-176
Abstract:
Total nominal US health care spending increased 5.8 percent and reached $3.2 trillion in 2015. On a per person basis, spending on health care increased 5.0 percent, reaching $9,990. The share of gross domestic product devoted to health care spending was 17.8 percent in 2015, up from 17.4 percent in 2014. Coverage expansions that began in 2014 as a result of the Affordable Care Act continued to affect health spending growth in 2015. In that year, the faster growth in total health care spending was primarily due to accelerated growth in spending for private health insurance (growth of 7.2 percent), hospital care (5.6 percent), and physician and clinical services (6.3 percent). Continued strong growth in Medicaid (9.7 percent) and retail prescription drug spending (9.0 percent), albeit at a slower rate than in 2014, contributed to overall health care spending growth in 2015.
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Effects of Payment Reform in More versus Less Competitive Markets
Neeraj Sood et al.
Journal of Health Economics, January 2017, Pages 66–83
Abstract:
Policymakers are increasingly interested in reducing healthcare costs and inefficiencies through innovative payment strategies. These strategies may have heterogeneous impacts across geographic areas, potentially reducing or exacerbating geographic variation in healthcare spending. In this paper, we exploit a major payment reform for home health care to examine whether reductions in reimbursement lead to differential changes in treatment intensity and provider costs depending on the level of competition in a market. Using Medicare claims, we find that while providers in more competitive markets had higher average costs in the pre-reform period, these markets experienced larger proportional reductions in treatment intensity and costs after the reform relative to less competitive markets. This led to a convergence in spending across geographic areas. We find that much of the reduction in provider costs is driven by greater exit of “high-cost” providers in more competitive markets.
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Health Spillovers Among Hospital Patients: Evidence from Roommate Assignments
Olga Yakusheva
American Journal of Health Economics, forthcoming
Abstract:
This study examines health spillovers among hospital patients using a natural experiment of conditionally random hospital roommate assignments and electronic medical records data for a sample of 3,793 patients and their roommates. The study finds that positive health spillover effects may play an important role in reducing the amount of care the patient requires during hospitalization, shortening length of hospital stay, and lowering hospitalization cost, with little evidence of negative health effects for most patients. Mechanisms of roommate effects and implications for health-care delivery and policy are also considered.
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Brett Lissenden & Nengliang “Aaron” Yao
Health Affairs, January 2017, Pages 101-107
Abstract:
The Affordable Care Act (ACA) helped make preventive care, including recommended cancer screening, more affordable and accessible for millions of Americans. Using population-based data from the Surveillance, Epidemiology, and End Results (SEER) Program, we estimated the impact of ACA policy changes to facilitate the diagnosis of cancer at an earlier and more treatable stage. We estimated that the ACA resulted in an increase of 8,400 (8 percent) diagnoses of early-stage colorectal cancer among US seniors in the period 2011–13. However, the ACA had no distinguishable effect on the number of diagnoses of early-stage breast cancer over the same time period. It is likely that the ACA initially affected the diagnosis of colorectal cancer more than that of breast cancer because the decrease in out-of-pocket spending was larger for colorectal than for breast cancer screening.
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Barry Rosenberg et al.
PLoS ONE, December 2016
Methods and Findings: We used information from 16 independent data sources, including 22 million all-payer inpatient admissions from the Healthcare Cost and Utilization Project (which covers regions where 50% of the U.S. population lives) to analyze 24 inpatient mortality, inpatient safety, and prevention outcomes. We compared outcome variation at state, hospital referral region, hospital service area, county, and hospital levels. Risk-adjusted outcomes were calculated after adjusting for population factors, co-morbidities, and health system factors. Even after risk-adjustment, there exists large geographical variation in outcomes. The variation in healthcare outcomes exceeds the well publicized variation in US healthcare costs. On average, we observed a 2.1-fold difference in risk-adjusted mortality outcomes between top- and bottom-decile hospitals. For example, we observed a 2.3-fold difference for risk-adjusted acute myocardial infarction inpatient mortality. On average a 10.2-fold difference in risk-adjusted patient safety outcomes exists between top and bottom-decile hospitals, including an 18.3-fold difference for risk-adjusted Central Venous Catheter Bloodstream Infection rates. A 3.0-fold difference in prevention outcomes exists between top- and bottom-decile counties on average; including a 2.2-fold difference for risk-adjusted congestive heart failure admission rates. The population, co-morbidity, and health system factors accounted for a range of R2 between 18–64% of variability in mortality outcomes, 3–39% of variability in patient safety outcomes, and 22–70% of variability in prevention outcomes.
Conclusion: The amount of variability in health outcomes in the U.S. is large even after accounting for differences in population, co-morbidities, and health system factors. These findings suggest that: 1) additional examination of regional and local variation in risk-adjusted outcomes should be a priority; 2) assumptions of uniform hospital quality that underpin rationale for policy choices (such as narrow insurance networks or antitrust enforcement) should be challenged; and 3) there exists substantial opportunity for outcomes improvement in the US healthcare system.
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Disclosing Physician Ratings: Performance Effects and the Difficulty of Altering Ratings Consensus
Henry Eyring
Harvard Working Paper, December 2016
Abstract:
This study addresses the effects of a health care system publicly disclosing patient ratings of some of its physicians. I find evidence that the disclosure leads to: 1) performance improvement as measured by the ratings and by objective quality measures, and 2) a bias among raters, whereby raters positively weight a physician’s published average rating in forming their own subsequent ratings of the physician. This study provides the first evidence of either result in the context of the growing trend of consumer-rating disclosure. I use web traffic data to assess how the performance and bias effects vary with public attention to the disclosed ratings. I find evidence consistent with public attention reinforcing raters' bias toward echoing a physician's past rating, thus impeding rating improvement. On average, the disclosure yields a rating improvement of 17 percentile points in a national distribution of ratings, and biases ratings toward the physician’s published average by 24 percentile points in that distribution. Collectively, the results show that disclosing consumer ratings has performance benefits, but also introduces a bias that works against ratings reflecting changes in service.
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Correlations Among Hospital Quality Measures: What “Hospital Compare” Data Tell Us
Jianhui Hu et al.
American Journal of Medical Quality, forthcoming
Abstract:
A number of quality rating systems to rank health care providers have been developed over the years with the intention of helping consumers make informed health care purchasing decisions. Many use sets of individual quality measures to calculate a global rating. The utility of a global rating for consumer choice hinges on the relationships among included measures and the extent to which they jointly reflect an underlying dimension of quality. Publicly reported data on 4 quality domains — complication, mortality, readmission, and patient safety — from Centers for Medicare & Medicaid Services’ Hospital Compare website were used to examine correlations among individual measures within each measure group (within-group correlations) and correlations between pairs of measures across different measure groups (between-group correlations). Modest within-group correlations were found in only 2 domains (mortality and readmission), and there were no meaningful between-group associations. These findings raise questions about whether consumers can reliably depend on global quality ratings to make informed decisions.
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Seokjun Youn et al.
Texas A&M University Working Paper, November 2016
Abstract:
Patient-centric healthcare reform models pursue lower healthcare costs, improved care quality, and better patient population health outcomes. Many patient-centric reform models focus on standardizing treatment protocols and reducing care delivery variability. Yet the structure of reform models themselves may lead to unintended process variability, the implications of which researchers should analyze. Prior research has not determined whether the reform models can potentially drive better patient-centric outcomes. A distinct challenge in analyzing their potential impact concerns a lack of publicly available historical data on reform models. We circumvent this challenge by recasting available data into relevant metrics, and examining how variation in hospital medical charges relates to patient-centric reform model goals. To do so, we develop a hospital-condition level measure called weighted average coefficient of variation (WACV) to identify the degree of variation in hospital medical charges resulting from underlying care process variability. WACV contributes by capturing unwarranted process variation in medical care protocols after controlling for warranted variation due to patient distributions of illness severity. Using Medicare data from New York state, we find evidence that higher charge variation (WACV) levels are indeed associated with lower hospital technical efficiency. Secondly, we show that prior-period process quality (that measures how well a hospital adheres to evidence-based medical guidelines) has a significant negative association with WACV. In contrast, the prior-period outcome quality measures are not associated with WACV. For policy-makers, the results imply that managerial incentives and interventions based on process quality may be more effective for changing operational behaviors, compared to basing incentives and interventions solely on outcome quality. Further, the results imply that WACV should play a role in the design of healthcare reform models. We examine these implications for bundled payment programs, which fix the amount of reimbursement for hospitals within a predefined boundary of patient care episode. Empirical results suggest that the current bundled payment provider selection mechanism does not consider the degree of unwarranted variation in charges, which we claim to be the improvement opportunity for each participating provider. In doing so, our results contribute by demonstrating that existing bundled payment program policies may not achieve intended goals.
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Health Insurance Costs and Employee Compensation: Evidence from the National Compensation Survey
Priyanka Anand
Health Economics, forthcoming
Abstract:
This paper examines the relationship between rising health insurance costs and employee compensation. I estimate the extent to which total compensation decreases with a rise in health insurance costs and decompose these changes in compensation into adjustments in wages, non-health fringe benefits, and employee contributions to health insurance premiums. I examine this relationship using the National Compensation Survey, a panel dataset on compensation and health insurance for a sample of establishments across the USA. I find that total hourly compensation reduces by $0.52 for each dollar increase in health insurance costs. This reduction in total compensation is primarily in the form of higher employee premium contributions, and there is no evidence of a change in wages and non-health fringe benefits. These findings show that workers are absorbing at least part of the increase in health insurance costs through lower compensation and highlight the importance of examining total compensation, and not just wages, when examining the relationship between health insurance costs and employee compensation.
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Daeyong Lee & Fan (Alicia) Zhang
Finance Research Letters, forthcoming
Abstract:
This article examines how the Medicaid expansion of the 2010 Affordable Care Act (ACA) affected firm performance in the health services industry. The U.S. federal government expanded Medicaid coverage up to 138% of the federal poverty level for low-income households, and the expansion increased demand for health care services after the ACA. Using quarterly Compustat data from the first quarter of 2009 to the first quarter of 2016, we find that the Medicaid expansion significantly increased firm performance (the return on assets by 0.01, Tobin's q by 0.21, and the return on equity by 0.17) in the health services industry.
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Why trash don’t pass? Pharmaceutical licensing and safety performance of drugs
Tannista Banerjee & Arnab Nayak
European Journal of Health Economics, January 2017, Pages 59–71
Abstract:
This paper examines how asymmetric information in pharmaceutical licensing affects the safety standards of licensed drugs. Pharmaceutical companies often license potential drug molecules at different stages of drug development from other pharmaceutical or biotechnology companies and complete the remaining of research stages before submitting the new drug application(NDA) to the food and drug administration. The asymmetric information associated with the quality of licensed molecules might result in the molecules which are less likely to succeed to be licensed out, while those with greater potential of success being held internally for development. We identify the NDAs submitted between 1993 and 2004 where new molecular entities were acquired through licensing. Controlling for other drug area specific and applicant firm specific factors, we investigate whether drugs developed with licensed molecules face higher probability of safety based recall and ultimate withdrawal from the market than drugs developed internally. Results suggest the opposite of Akerlof’s (Q J Econ 84:488–500, 1970) lemons problem. Licensed molecules rather have less probability of facing safety based recalls and ultimate withdrawal from the market comparing to internally developed drug molecules. This suggests that biotechnology and small pharmaceutical firms specializing in pharmaceutical research are more efficient in developing good potential molecules because of their concentrated research. Biotechnology firms license out good potential molecules because it increases their market value and reputation. In addition, results suggest that both the number of previous approved drugs in the disease area, and also the applicant firms’ total number of previous approvals in all disease areas reduce the probability that an additional approved drug in the same drug area will potentially be harmful.
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Paying Medicare Advantage Plans: To Level or Tilt the Playing Field
Jacob Glazer & Thomas McGuire
Journal of Health Economics, forthcoming
Abstract:
Medicare beneficiaries are eligible for health insurance through the public option of traditional Medicare (TM) or may join a private Medicare Advantage (MA) plan. Both are highly subsidized but in different ways. Medicare pays for most of costs directly in TM, and subsidizes MA plans based on a “benchmark” for each beneficiary choosing a private plan. The level of this benchmark is arguably the most important policy decision Medicare makes about the MA program. Many analysts recommend equalizing Medicare’s subsidy across the options − referred to in policy circles as a “level playing field.” This paper studies the normative question of how to set the level of the benchmark, applying the versatile model developed by Einav and Finkelstein (EF) to Medicare. The EF framework implies unequal subsidies to counteract risk selection across plan types. We also study other reasons to tilt the field: the relative efficiency of MA vs. TM, market power of MA plans, and institutional features of the way Medicare determines subsidies and premiums. After review of the empirical and policy literature, we conclude that in areas where the MA market is competitive, the benchmark should be set below average costs in TM, but in areas characterized by imperfect competition in MA, it should be raised in order to offset output (enrollment) restrictions by plans with market power. We also recommend specific modifications of Medicare rules to make demand for MA more price elastic.
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Children's health insurance, family income, and welfare enrollment
Martin Saavedra
Children and Youth Services Review, February 2017, Pages 182–186
Abstract:
Children from wealthier families are more likely to have health insurance than children from poorer families on average. However, the relationship between family income and health insurance is non-linear, as children near the Federal Poverty Line (FPL) are less likely to be insured than children from both wealthier families (who obtain health insurance from the private market) and poorer families (who obtain government-funded health insurance). This health insurance dip has persisted even as Medicaid has been expanded to cover those above the FPL. One explanation for this is that families who are far below the poverty line are better connected to the welfare system, and consequently, are more likely to enroll in Medicaid. This study uses data from the 2001–2013 Current Population Surveys and finds that (1) controlling for many of the determinants of eligibility, those on other forms of government assistance are more likely to have health insurance, and (2) the relationship between family income and children's health insurance status is strictly increasing after controlling for enrollment in other welfare programs.
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Modeling Health Care Spending Growth of Older Adults
Laura Hatfield et al.
Health Services Research, forthcoming
Data Sources: Dynamic microsimulation calibrated to survey and administrative data.
Study Design: We augment Urban Institute's Dynamic Simulation of Income Model (DYNASIM) with modules that incorporate demand responses and economic equilibria, with dynamics driven by exogenous technological change. A lengthy technical appendix provides details of the microsimulation model and economic assumptions for readers interested in applying these techniques.
Principal Findings: The model projects total out-of-pocket spending (point of care plus premiums) as a share of income for adults aged 65 and older. People with lower incomes and poor health fare worse, despite protections of Medicaid. Spending rises 40 percent from 2012 to 2035 (from 10 to 14 percent of income) for the median beneficiary, but it increases from 5 to 25 percent of income for low-income beneficiaries and from 23 to 29 percent for the near poor who are in fair/poor health.
Conclusions: Despite Medicare coverage, near-poor seniors will face out-of-pocket spending that would render them, in practical terms, underinsured.
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What’s the Rush? Tort Laws and Elective Early-term Induction of Labor
Louise Marie Roth
Journal of Health and Social Behavior, December 2016, Pages 486-501
Abstract:
Tort laws aim to deter risky medical practices and increase accountability for harm. This research examines their effects on deterrence of a high-risk obstetric practice in the United States: elective early-term (37–38 weeks gestation) induction of labor. Using birth certificate data from the Natality Detail Files and state-level data from publicly available sources, this study analyzes the effects of tort laws on labor induction with multilevel models (MLM) of 665,491 early-term births nested in states. Results reveal that caps on damages are associated with significantly higher odds of early-term induction and Proportionate Liability (PL) is associated with significantly lower odds compared to Joint and Several Liability (JSL). The findings suggest that clinicians are more likely to engage in practices that defy professional guidelines in tort environments with lower legal burdens. I discuss the implications of the findings for patient safety and the deterrence of high-risk practices.
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Hummy Song et al.
University of Pennsylvania Working Paper, December 2016
Abstract:
Public relative performance feedback (RPF) on an individual worker’s productivity metrics is used in various organizations with the hopes of improving worker productivity, but its effects are not well understood. We examine whether public RPF could be leveraged to facilitate best practice adoption in an organization by enabling the validation of best practices shared by identifiable top performers. We use data from two emergency departments, both of which shared best practices for improving productivity and one of which changed from privately to publicly disclosing RPF to physicians. The public disclosure of RPF allowed workers to identify their top-performing coworkers, which in turn enabled the identification and validation of best practices within the work group. We find that the intervention is associated with a 10.9% improvement in physician productivity. We also find evidence for a significant reduction in variation in productivity across providers, which stems from bottom-ranked workers exhibiting differentially large improvements in productivity. These effects hold without sacrificing system-level performance, service quality, or worker attrition. Our results suggest that public disclosure of RPF, along with the validation of the best practices being shared, can improve worker productivity.