Productivity and Quality in Health Care: Evidence from the Dialysis Industry
Abstract: We show that healthcare providers face a tradeoff between increasing the number of patients they treat and improving their quality of care, with those providers facing the strongest incentives to treat more patients delivering the lowest quality of care. To measure the magnitude of this quality-quantity tradeoff, we estimate a model of dialysis provision that explicitly incorporates a center’s endogenous choice of treatment quality and allows for unobserved differences in productivity across centers. We find that centers may treat 1 percent more patients by allowing their expected infection rate to increase by 0.8 percentage points (6 percent), holding inputs and productivity fixed. Our approach provides unbiased estimates of productivity, whereas traditional methods misattribute lower-quality care to greater productivity. We also find (i) extensive quality-adjusted productivity dispersion across providers, (ii) better outcomes among non-profit entities, and (iii) comparatively little effect from competition.
